EUR/USD: Decline of high points

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At the end of the wedge formation, the Euro remained in a delicate position against the Dollar which, for several weeks now, has been supported by the American 10-year, whose firmness is measured by the inflation outlook.

Published on Friday, excluding food and energy, PCE (personal consumption expenditures), the Fed’s favorite barometer in its assessment of inflation, showed a monthly increase of 0.3%, perfectly within the target. Not enough, therefore, to influence the outlook for the trajectory of rates for the months to come. However, as Jeanne ASSERAF-BITTON notes, over one year, “PCE inflation is higher than expected in March at 2.7% per year in total and 2.8% in the “core”. Over 3 months (annualized), “core” inflation accelerates to 4.4%, driven by services to 5.5%.”

“Even though American growth was less good than expected in the first quarter, the pressure on prices has not made any progress, thus reinforcing the feeling that the Federal Reserve still has no more argument to trigger the first rate cuts,” laments Alexandre Baradez (IG France). Remember that the gross domestic product (GDP) of the United States grew less than expected, by 1.6% in the first quarter, according to a first estimate. Economists surveyed by the Wall Street Journal, for their part, expected an increase of 2.2% on an annual basis. Meanwhile, inflationary tensions persist since the underlying inflation indicator increased against all expectations, by 3.7% over the first three months of the year, after 2% in the fourth quarter.

In this context, the Fed, which concludes a Monetary Policy Committee (FOMC) this Wednesday, will deliver new elements of language which will be as many clues for the financial community. A status quo on federal rates is in any case expected. And for the next deadline, June 12, the CME Group’s FedWatch tool puts the probability of a new monetary status quo at 88.5%.

To “have a more precise timetable for the rate cut” […]”, we will certainly have to wait until the June meeting at which the macroeconomic projections will be updated,” warns Christopher Dembik, investment strategy advisor at Pictet AM. “In the meantime, the prospect of a “The decline in rates continues to recede, pushing up bond yields and the dollar.”

At midday on the foreign exchange market, the Euro was trading against $1.0715 approximately.

KEY GRAPHIC ELEMENTS

THE pullback very clear Thursday 04/18 on a resistance zone ($1.0693) will invite people to take short positions again on the EURUSD currency pair, especially as the break of the 50-day moving average (in orange) by its counterpart at 20 days (in dark blue) was made at a relatively large angle. the succession of high points (12/28, 03/08, 03/21, 04/09 and 04/26) is now clearly decreasing.

MEDIUM TERM FORECAST

Considering the key graphical factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).

Our entry point is at 1.0716 USD. The price target for our bearish scenario is at 1.0436 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0801 USD.

The expected profitability of this Forex strategy is 280 pips and the risk of loss is 85 pips.

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