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The Euro/Dollar currency pair stabilized around $1.0860, in a foreign exchange market which is awaiting two major meetings: the upcoming publication of American retail prices and the outcome tomorrow of the ECB Governing Council.
“The rise in consumer prices in the United States, expected on Wednesday, will be essential to anticipate the Fed’s policy,” insists César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management. “After the report on the labor market and the mixed ISM indices, the inflation figures could call into question the scenario of three rate cuts by the Fed this year, which the market still favored last week. “
US retail prices are expected to increase by 3.4% year-on-year, for the broadest basket of products. Meet at 2:30 p.m. to read these CPIs, the statistical highlight of the week.
On the ECB, the question that remains is that of Christine Lagarde’s room for maneuver, who could beat J Powell for the first rate cut in June, even if only by a few hours… The trajectory of price is in fact a little more comfortable for the boss of the ECB. However, “services inflation in the euro zone has proven to be more persistent than expected and compared to previous cycles of disinflation”, put into perspective the strategists at Nomura, who predict “a decline in services inflation this year and next year, but [des] risks […] clearly trending upwards.
“The ECB has been concerned that services inflation has not fallen significantly. We expect the ECB to start cutting rates in June and will do so once per meeting this year, but “The biggest risk to our rate forecast is either a later start to the taper cycle or a slowing of the pace of cuts if these upside risks become the central scenario.”
Verdict tomorrow for the outcome of the Council of Governors of the Central Bank. If a status quo on the rates themselves is almost acquired, the elements of communication will naturally be scrutinized.
To be followed, therefore, with the greatest attention this Wednesday, consumer prices in the United States at 2:30 p.m., and the Minutes, the traditional monetary policy report from the Fed at 8:00 p.m.
At midday on the foreign exchange market, the Euro was trading against $1.0860 approximately.
KEY GRAPHIC ELEMENTS
While the currency pair regains support on the lower limit of the Bollinger bands (20;2.5) and the 20-day moving average (in dark blue) still gravitates above its 50-day counterpart (in orange ), the opinion remains bullish. We will target the upper Bollinger band, currently in the immediate vicinity of $1.1 per €. Beyond that, a succession of intermediate resistance presents itself, at 1.1012, 1.1069 and $1.1144.
MEDIUM TERM FORECAST
Considering the key graphical factors that we have mentioned, our opinion is positive in the medium term on the Euro Dollar (EURUSD).
Our entry point is at 1.0862 USD. The price target for our bullish scenario is $1.1068. To preserve the invested capital, we advise you to position a protective stop at 1.0767 USD.
The expected profitability of this Forex strategy is 206 pips and the risk of loss is 95 pips.
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