EUR/USD: On a key technical level before US inflation

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The Euro, expressed in Dollar, regained contact on Wednesday with a bearish oblique line (in black), a technical resistance level, as the publication of consumer prices across the Atlantic approaches. Excluding food and energy (core data), these prices, monitored like milk on the fire by the Fed, are expected to increase monthly by 0.3%. Note that yesterday, a leading inflation indicator, namely producer prices, disappointed the financial community by coming out significantly above their target. These wholesale prices, excluding food and energy, rose by 0.5%, well above expectations (+0.2%).

The CPIs, which will be published at 2:30 p.m., will obviously constitute key data for the market as investors are once again counting on rate cuts from the American Federal Reserve (Fed) representing 0.5 percentage points. A scenario reinforced by the words of J Powell, President of the Fed, during a speech during a banking event in Amsterdam.

Forex traders will also follow monthly retail sales, also at 2:30 p.m.

On this side of the Atlantic the Bank of Sweden and the Bank of England have royally paved the way for the ECB for a first rate cut this summer, against a backdrop of “disinflationary trend [qui] is confirmed by the decline in producer prices in March”, for Romane Ballin, bond manager at Auris Gestion.

“The ECB should thus be able to initiate its monetary easing from June. The imminence of a reduction in rates is also reflected in the latest report from the ECB; some members even wanted to reduce them from April, although those “These only constituted a minority. If an initial reduction seems certain, it is nevertheless important to keep in mind that the easing will not necessarily be rapid,” says the manager.

At midday on the foreign exchange market, the Euro was trading against $1.0825 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 1.0825 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 389 pips and the risk of loss is 61 pips.

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