EUR/USD: Under pressure from $1.09

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As the Fed’s policy committee approaches its meeting, the spot EURUSD remained relatively stable, significantly below the resistance level of $1.09. A status quo is the consensus for this meeting which will nevertheless, if necessary, be an opportunity to glean clues for the future.

Pictet Wealth Management strategists expect “two 25 basis point rate cuts this year, in September and December, given the slowdown in inflation and especially the cooling of the labor market. But until we see a further deterioration in labor demand and an increase in layoffs (and not just a normalization), we will continue to expect a pace of quarterly cuts. There is a risk of a decline in wages this week due to Hurricane Beryl, which hit Texas and is responsible for part of the recent increase in jobless claims.”

Yesterday, the statistical calendar finally got denser, with real estate prices (S&P Case Schiller index) up 6.8% annually, the consumer confidence index (Conference Board) as well as new job offers (JOLTS) at 8.18M. This last figure is a foretaste of employment, before many meetings (ADP survey this Wednesday, unemployment benefit registrations, NFP report), throughout the week.

Coming up next is the ADP employment survey at 2:15 p.m., the Chicago PMI at 3:45 p.m., before pending home sales at 4:00 p.m. and crude inventories at 4:30 p.m. At 8:00 p.m., we will follow the Fed’s verdict, before its press conference at 8:30 p.m. A rich program on the statistical front, this Wednesday.

In the immediate future, currency traders have taken note of the inflation figures in the Eurozone, in the sense of consumer prices in preliminary data for the month of July. EuroStat estimates the annual increase in prices at +2.9%, excluding food, energy and tobacco, whereas on average the economists and analysts surveyed were expecting +2.8%.

At midday on the foreign exchange market, the Euro was trading against $1.0825 approximately.

KEY GRAPHIC ELEMENTS

After failing against a graphical resistance level around $1.0910, the EURUSD spot has retreated, now finding itself on a congestion zone of two notable moving averages, at 20 and 50 days. Negative opinion maintained.

MEDIUM TERM FORECAST

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

Our entry point is at 1.0827 USD. The price target of our bearish scenario is at 1.0601 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0907 USD.

The expected return on this Forex strategy is 226 pips and the risk of loss is 80 pips.

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