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The Euro/Dollar currency pair graced us with the outline of a school wedge figure, a classic figure of accumulation of energy from which an exit from the bottom, after a possible last bullish bout, is anticipated. Basically, the market psychology governing the EURUSD pair remained the same, the Dollar remaining supported by the insolent health of the American economy, and the Euro suffering from the chronic difficulties of the German economy and French budgetary problems.
The latest macroeconomic publications to date confirm this framework. The NFP in particular, the traditional monthly report on the health of private employment in the United States, came out at a particularly solid level on Friday, without however reducing the probability of seeing the remuneration of Fed Funds fall by 25 basis points on the 18th. next December.
Published this morning, the Sentix index of investor confidence in the Euro Zone plunged deeper into negative territory at -17.5, compared with a consensus close to the last publication of the indicator, at -12.4. This is the worst score since November 2023, both on the “inventory” component and for the “forecast” component. The only German component “states of affairs” falls suddenly below -50, in the wake of the announcement of new elections to the Bundestag.
It is in this context that a new meeting of the Monetary Policy Committee of the European Central Bank (ECB) will end on Thursday. “The European Central Bank (ECB) is maintaining its policy of lowering rates and is expected to reduce the deposit rate again by 25 basis points, to 3.00%, in December,” anticipates Ulrike Kastens, European Economist at DWS. “
“Markets’ attention should be focused on the new projections until 2027. The deterioration of sentiment indicators could lead to a downward revision of growth forecasts, particularly for 2025 and 2026. This should also be reflected in the forecasts inflation target of 2.0% will be achieved over the period 2025-2027, which, in our view, paves the way for a further reduction in the deposit rate to 2.00%, lower limit of our estimate of the neutral rate.”
At midday on the foreign exchange market, the Euro was trading against $1.0560 approximately.
KEY GRAPHIC ELEMENTS
The wedge formed since November 22 is coming to an end, and the energy contained is now compressed. An exit from the bottom, consistent with the entry from the top in the second part of November in a volatile environment, is anticipated.
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 1.0562 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 1.0691 USD.
The expected profitability of this Forex strategy is 461 pips and the risk of loss is 129 pips.
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