EUR/USD: The pullback on $1.0550 ends

(News Bulletin 247) – This article, with open access, is produced by the stock market analysis and strategy research team at News Bulletin 247. To ensure you don’t miss any opportunities, consult all the analyzes and discover our portfolios by accessing our Privileges area.

The Euro Dollar currency pair continued to form a pullback (graphic rejection) on $1.0550, in a chronically negative bias, against a backdrop of increasing economic imbalance between the two shores of the Atlantic.

“The euro zone is more than ever penalized by its two (former) locomotives stuck, what’s more, in political blockages. While we still wonder how France will succeed in bringing its public finances back on the right path (without , we hope, impact growth too much), Germany, for its part, must completely review its economic model in place since the 90s and reunification: exports to China, cheap Russian oil and gas and of American protectionism. three, there are none left,” coldly notes Thomas Giuduci, head of bond management at Auris Gestion.

While on the contrary, “everything seems to be going well across the Atlantic: producer prices are slowing down, tensions on the labor market are decreasing and, above all, business leaders’ forecasts are reaching two-year highs.” and a half thanks in particular to the pro-business policy desired by the new American administration.

The statistics published since the beginning of the week perfectly corroborated this dichotomy, between a gloomy IFO (German business confidence), and an American consumer confidence index (Conference Board) in great shape, as Thanksgiving approaches, a period which traditionally mark across the Atlantic, the start of end-of-year shopping.

Yesterday the program was copious, concentrated before the big Thanksgiving holiday break.

The US Federal Reserve’s preferred inflation gauge, PCE prices, accelerated slightly to 2.3% year-on-year in October, and 2.8% for its non-food and energy component, which is in line to market expectations. Shortly before the opening of Wall Street, a battery of American statistics, concentrated before Thankgiving, came to liven up the debates. Let’s start with the traditional new weekly registrations for unemployment benefits, which give an idea of ​​the state of tension in the job market. They come out at 213,000, very close to expectations. No deviation from the consensus regarding Q3 GDP, at +2.8% on an annual basis in preliminary data. Orders for durable goods do not send a particularly readable message either, due to a small deviation from the consensus, on the other hand, the monthly trade balance for goods, structurally in deficit, pleasantly surprises by coming out below the symbolic threshold of 100 billion deficit.

Furthermore, the appetite for risk, directly correlated to the single currency, remained upset by Trump’s very recent comments on foreign trade. If we knew the 45th, and soon 47th President of the United States, was offensive on customs tariffs, very concrete declarations of intent shook the Asian and European stock markets.

He wants to impose customs duties of 25% on all products from Mexico and Canada and increase those for products imported from China by 10%. Donald Trump justifies these trade retaliatory measures in retaliation for illegal immigration, and drug trafficking and in particular Fentayl, a powerful opioid which is wreaking havoc in the United States.

“As everyone knows, thousands of people are streaming through Mexico and Canada, bringing with them crime and drugs at levels never seen before,” he said. “This tariff will remain in effect until drugs, particularly Fentanyl, and all illegal aliens stop invading our country!”, continued the president-elect.

This same appetite for risk, in Europe, remained thwarted by the fear of a period of political instability in France, while the use of “49.3” seemed inevitable to pass the budget. A solution deemed “probable, certainly” by the person concerned, interviewed last night on TF1. The Prime Minister insisted on the consequences on the financial markets in the event of censorship of his government. While it is clear that the Prime Minister, with this rhetoric, is playing the card of defending his young government, the consequences of a new period of political instability could weigh on rates.

At midday on the foreign exchange market, the Euro was trading against $1.0550 approximately.

KEY GRAPHIC ELEMENTS

The currency pair has just come out from the bottom, in intense volatilityof a wedge pattern, which confirms the bearish bias, which is now fundamental. Since then, the fragile supports have broken one after the other. Negative review maintained. However, at this stage the decline and the formation of a technical rebound cannot be long in coming, we are watching for the signs.

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 1.0550 USD. The price target for our bearish scenario is at 1.0101 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0676 USD.

The expected profitability of this Forex strategy is 449 pips and the risk of loss is 126 pips.

DAILY DATA CHART