EUR/USD: Cards reshuffled for the Fed and the ECB

(News Bulletin 247) – Forces momentarily rebalanced on the Euro/Dollar currency pair, which plunged yesterday to levels not seen since June 2020, before recovering.

The Kremlin has now crossed the Rubicon: after having recognised, by openly supporting the separatists in Dombass, the independence of two regions in this eastern part of Ukraine, it has gone on the open military offensive, which constitutes a further step in the escalation, and further materializes the entry into a new Cold War with the West. New sets of sanctions have been taken by the United States and the European Union.

And it is at this stage all the uncertainty about the Kremlin’s intentions that freezes the exchange rate initiatives. “We do not really know the Russian intentions: to invade all of Ukraine and install a government under the orders of the Kremlin (a risky approach because Russia would get bogged down in an occupation of Ukrainian territory with the risk of entering an Afghan-type quagmire …) or destabilize the Ukrainian army (and its rear bases) to better settle in the Donbass or even within a wider area going from the Donbass to the already annexed Crimea (to completely control access to the Sea d’Azov).”, explains Sébastien GRASSET, Member of the Management Board and Director of Asset Management at AURIS Gestion.

“Consequences are to be expected for the price of oil, already marked by fears of inflation, and the symbolic cap of 100 USD for crude oil could panic the algorithms. This context, however, makes an aggressive rise in rates unlikely. the share of central banks, which could influence their dynamics.” for Alexandre Neuvy, Managing Partner. And that’s the whole point of the meteoric rise of the Nasdaq Composite in yesterday’s session, despite a very large bearish gap opening. The question is therefore to what extent the Fed will react to this “black swan”. The Fed convenes its Monetary Policy Committee (FOMC) in March and so far, a double hike (i.e. 50 bps at once) of Fed Funds was likely.

On the European side, Mrs. Lagarde, President of the ECB, will speak during an online speech at 4:00 p.m. on the Ukrainian crisis. Remember that the leading economic power in the Euro Zone, Germany, is particularly dependent on Russia for its natural gas supplies.

Statistical benchmarks took a back seat yesterday. It should be noted, however, that the US Q4 GDP, in final data, came out in line with expectations, at +7.0% quarter on quarter.

To follow the PCE price index (Personal Consumer Expenditures) in the United States at 2:30 p.m. This is the Fed’s preferred measure of inflation.

At midday on the foreign exchange market, the Euro was trading against $1.1180 about.

KEY GRAPHIC ELEMENTS

The transition phase between February 4 and 23, in the form of a slip without federation, under the 100-day moving average (in orange) is over. The underlying bearish bias aligns with the short term, and the chart of a candle today, at least at this point in school black marubozu, illustrates the firm grip of the selling side. We are revising our bearish targets, to $1.10, then if necessary to $1.0856

MEDIUM TERM FORECAST

In view of the key graphic factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).

Our entry point is at 1.1173 USD. The price target of our bearish scenario is at 1.0857 USD. To preserve the capital invested, we advise you to position a protective stop at 1.1241 USD.

The expected return of this Forex strategy is 316 pips and the risk of loss is 68 pips.

CHART IN DAILY DATA

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