EUR/USD: Is the Euro rising, or is the Dollar falling?

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A fairly busy schedule on the American macroeconomic front this Thursday for currency traders. They will be particularly closely monitoring retail sales, unemployment benefit registrations, the Empire State and Philly Fed manufacturing indices at 2:30 p.m., as well as the monthly report on industry at 3:15 p.m. All opportunities to gauge the degree of softness, or brutality, of the landing of the American economy. In recent weeks, the mood had become abruptly tense for the greenback, against a backdrop of fears that the world’s largest economy would enter a “recession”. The monthly employment report for July, in particular, had sounded the alarm.

On Tuesday and Wednesday, the mood softened, particularly with the confirmation of a decline in inflationary tensions, first in producer prices and then consumer prices.

In detail in July, American consumer prices increased by 2.9% over one year, after 3% in June. They are back to their lowest level since March 2021, and this slowdown is greater than expectations, since economists surveyed by the Wall Street Journal were expecting a figure of 3% over one year. Over one month, inflation rose to 0.2% in line with expectations. “Core” inflation, i.e. excluding food and energy prices, is also in line with the consensus at 3.2%, according to data from the Bureau of Labor Statistics. And it is above all a little less than the 3.3% in June.

This rise in the Euro only reveals the weakness of the Dollar in the background. Because on the single currency side, bullish arguments are intrinsically lacking. On Tuesday, currency traders took note of the ZEW index of confidence in the German economy, which fell to 19.2, compared to 41.8 the previous month. ‘Germany’s economic outlook is collapsing,’ declared the president of the ZEW, Professor Achim Wambach, PhD.

“In the current investigation [sur le moral des investisseurs]we are seeing the sharpest decline in economic expectations in the past two years. Economic expectations for the euro area, the US and China are also clearly deteriorating. As a result, expectations for export-intensive German sectors in particular are declining. Economic expectations are likely to remain affected by high uncertainty, fuelled by ambiguous monetary policy, disappointing trade data from the US economy and growing concerns about an escalation of the conflict in the Middle East. More recently, this uncertainty has translated into turbulence on international stock markets.”

Please note that the main stock markets in the Eurozone will remain open on August 15 (Assumption), with the exception of Milan.

At midday on the foreign exchange market, the Euro was trading against $1,1010 approximately.

KEY GRAPHIC ELEMENTS

The end of the short consolidation on the Euro / Dollar (August 06 – 09) was classically followed by a rise in increasing volatility, giving more credit to the support role of the 20-day moving average (in dark blue).

MEDIUM TERM FORECAST

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

Our entry point is at 1.1010 USD. The price target of our bullish scenario is at 1.1249 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0929 USD.

The expected return on this Forex strategy is 239 pips and the risk of loss is 81 pips.

DAILY DATA CHART