EUR/USD: A bearish slant puts pressure

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While the Bank of England has further marked out the ECB’s path for a first reduction in key rates, and the prospect of 2 federal rate cuts is no longer ruled out this year, market psychology has barely changed on the Euro/Dollar currency pair, now in the immediate vicinity of a bearish oblique line, with a high graphic resistance value.

As a reminder, the British central bank has kept its rates unchanged. However, the institution is clearly heading towards a decline in the coming months. “With the progress made in ensuring that inflation remains around 2% (…) it is likely that we will need to lower rates in the coming quarters and make monetary policy less restrictive, perhaps more than expected by the market,” Bank of England Governor Andrew Bailey said at a press conference, according to comments reported by AFP.

Across the Atlantic, the latest figures, whether on employment (NFP, registrations for unemployment benefits, labor costs), on consumption (U-Mich and Conference Board index), argue for a welcome easing of tensions on the American economy, with the mechanical effect of a decline in the American 10-year yield, below 4.50.

On the agenda this Monday, to follow the conclusions of the Eurogroup (meeting of Finance Ministers of the member countries of the Euro Zone). We will have to wait until tomorrow for the agenda to become more dense, notably with the producer price indices across the Atlantic.

At midday on the foreign exchange market, the Euro was trading against $1.0780 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 currency pair EURUSD, especially since the break of the 50-day moving average (in orange) by its 20-day counterpart (in dark blue) took place 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, under an oblique line of resistance (in black).

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 1.0784 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 1.0886 USD.

The expected profitability of this Forex strategy is 348 pips and the risk of loss is 102 pips.

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