EUR/USD: Technical barrier at $1.0885

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Victim of a “scissors” effect on the foreign exchange market, the Euro/Dollar currency pair fell back below its 20-day moving average (in dark blue), a short-term trend curve with a sharp downward trend.

On the one hand, the greenback mechanically regained color with the rise in bond yields, the American 10-year now crossing 4.60%. On the other hand, in a climate not conducive to risk-taking, the Euro, one of the reference barometers of this appetite for risk, was shunned.

This is due to renewed tensions on the bond market, particularly in the United States, on the eve of the most anticipated statistical publication of the week, PCE (personal consumption expenditures) prices. These prices in core data (excluding food and energy) are expected to increase monthly by 0.3%, and any exceeding of this target would cause further pressure on rates, even though the market only expects only one cut in federal rates by the end of the year.

The reason ? A burst, in the space of a few days, of (too?) firm American macroeconomic statistics. likely to invite the Fed to keep its finger pressed on the “pause” button. On Tuesday, it was the turn of the American consumer confidence index to exceed the target. As a reminder, consumption is the main engine of wealth creation across the Atlantic, and any leading indicator of consumption is necessarily closely followed in the trading rooms.

Yesterday the return to balance of the Rchmond Fed manufacturing index, expected in negative territory, participated in this movement. It is therefore with a certain nervousness that currency traders will take note of the weekly registrations for unemployment benefits and the monthly GDP at 2:30 p.m. this Thursday, before being able to project the PCE, the statistical highlight of the week.

Alexandre Baradez (IG France) also warns of a leading indicator of inflation, namely maritime transport prices, which are experiencing some “turmoil”. Should we be worried about it?

“Not necessarily anything to worry about this rebound in prices right away, we are very far from the post-Covid bullish panic,” according to the analyst. “But it will be necessary for signs of relaxation not to take too long to arrive, as in March-April, so that observers (and the markets) do not worry about too significant an impact of these prices in the distribution chain. , up to the final sale price…While American inflation has struggled to make significant progress for several months, and the Fed has cooled expectations on rate cuts, the rebound in shipping prices should not fuel this situation.”

At midday on the foreign exchange market, the Euro was trading against $1.0815 approximately.

KEY GRAPHIC ELEMENTS

The currency pair recorded a double top at $1.0885 which further asserts itself as a resistance level, below which the bearish bias can regain its rights. Especially in the event of rapid reintegration of the lower part to an oblique (drawn in black), a major graphic reference point.

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 1.0814 USD. The price target for our bearish scenario is at 1.0551 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 263 pips and the risk of loss is 72.000000000001 pips.

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