EUR/USD: ECB Day

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Important meeting for currency traders this Thursday, with the outcome of a new Council of Governors of the European Central Bank. Not that the monetary decision itself is the subject of unbearable suspense – a 25 basis point reduction in the main key rate is a given – but it will be interesting to note the elements of language used, particularly at the press conference ( 2:45 p.m.), while the German economy is showing signs of weakness and the French public accounts are under surveillance.

“The October meeting should give the ECB the opportunity to lower its key rate a second time by 0.25%,” certifies Emmanuel AUBOYNEAU, associate manager of Amplegest. “The deteriorating economic situation, especially in Germany but also in France and inflation which is regularly decreasing in the euro zone make this monetary easing legitimate. Christine Lagarde should not depart from her traditional cautious discourse but we remain convinced that we are have well and truly entered a cycle of falling rates which should continue in 2025.”

Ms. Lagarde will have to play the balancing act, so as not to put a coin back into the inflation machine.

“If the ECB continues its rate cut, it will likely seek to take advantage of this dynamic to support a rebound in economic activity, even if inflation remains a concern. This dual objective reflects central banks’ attempt to find a delicate balance between supporting growth and controlling inflation in an unpredictable context”, analyzes William Vaughan, Associate Portfolio Manager at Brandywine Global (subsidiary of Franklin Templeton).

Currency traders will also have to deal with a particularly dense and rich agenda on the American macroeconomic side this afternoon. To follow in priority the weekly registrations for unemployment benefits and the Philly Fed at 2:30 p.m., the monthly report on the industry at 3:15 p.m. and the NAHB residential real estate index at 4:00 p.m.

For the moment, the final data on consumer prices in the Euro Zone have just been published, in line with the first estimates for the month of September, at +2.7% on an annual basis, excluding food, alcohol, energy and tobacco. .

At midday on the foreign exchange market, the Euro was trading against $1.0860 approximately.

KEY GRAPHIC ELEMENTS

The oblique support line (drawn in black) has given way in a significant and increasing level of volatility. The 50-day moving average (in orange) also gave way quickly, the bearish message is reinforced. Next graphic event to watch, the ongoing crossing of two remarkable moving averages, at 20 and 50 days. The crossing angle is important, in light of the current correction.

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 1.0859 USD. The price target for our bearish scenario is at 1.0665 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0933 USD.

The expected profitability of this Forex strategy is 194 pips and the risk of loss is 73.999999999999 pips.

DAILY DATA CHART