EUR/USD: The pair approaches parity

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Bearish bias confirmed for the Euro/Dollar, which continues to suffer from low future return potential, of the first currency compared to the second, at a time when the American economy is displaying insolent resilience, and where the he European economy is losing momentum with its French and German leaders.

“Public deficits and debt are another increasingly threatening pitfall which require more effective actions from States. We see in France the difficulty of reducing public spending and the natural propensity to prefer tax increases that are not very favorable to growth If we add lower inflation than expected and now to the objective of the Central Bank, everything now militates for more vigorous action by the latter. Internal debates within the monetary institution are bringing out voices of concern. more and more vocal in favor of an acceleration of the process of lowering rates. The cycle of monetary easing which began in July will therefore, in our opinion, continue and even amplify” comments Emmanuel Auboyneau, associate manager of Amplegest.

Across the Atlantic, “the cycle of monetary easing has begun but it should be slow and steady. An election of Donald Trump could also slow down these rate cuts at the margin due to a slightly more inflationary policy, particularly in terms of commercial”, continued the asset management executive.

In Germany, it is particularly the German industrial model, THE traditional strong point, which is showing its limits after several years of inflation.

Currency traders are keeping a close eye on the final stretch before the outcome of the American presidential election, while hot air is flying between the candidates, via intermediary meetings.

“As in the last elections, this could be decided by a few votes and the results could not be known the same day, each state having, moreover, its own electoral rules (and contesting the results)”, comments Thomas Giudici , head of bond management at Auris Gestion, who has the humility not to play the oracles: “It is therefore quite complicated to position the portfolios in one direction or the other as the result of the election is more of the casino than of political or financial analysis”.

Yesterday on a statistical level, the agenda was empty, but it will not be the same this Tuesday, with new job offers (JOLTS), and the consumer confidence index (Conference Board) at 4:00 p.m.

At midday on the foreign exchange market, the Euro was trading against $1.0795 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 1.0796 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 1.0881 USD.

The expected profitability of this Forex strategy is 245 pips and the risk of loss is 85 pips.

DAILY DATA CHART