EUR/USD: The Euro melts into parity with the Dollar

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The bearish bias of the currency pair was confirmed at the turn of the week, in the wake of a very important meeting on Friday.

This meeting is the NFP. Behind this acronym hides the report on private employment (excluding agriculture) in the United States, the Non-Farm Payrolls. This monthly barometer of employment tensions is particularly scrutinized by the Fed, in the sense that it can read advanced signs of inflation. Employment, with its insolent resilience across the Atlantic, is in such good health that it pushes the Federal Reserve to act with the greatest restraint on the rate cut lever.

And it is clear that the content of the December report is very, very solid. First of all, the unemployment rate, expected to be stable at 4.2% of the active population, has the luxury of falling to 4.1%, very close to full employment. Job creation in the private sector (excluding agriculture), expected at 164,000, came to 256,000, very well above the target. Finally, and this is the positive point to remember, the moderation of the increase in wages, of +0.3%, in line with analysts’ expectations.

THE Treasuries 10 yearsyield on US Treasury bonds maturing in 10 years, immediately heated up to close to 4.80%…

“Current figures indicate that there will probably be no further interest rate cuts in January, while markets now only expect further cuts in the second half of the year. It remains to be seen whether the Continued robustness in labor demand is due to post-election euphoria. But if this robustness continues, it certainly argues in favor of the US Federal Reserve keeping interest rates at a level. higher even a little longer than this which was planned a few months ago”, for Christian Scherrmann, American Economist DWS

According to the CME Group’s Fedwatch tool, investors are only expecting a drop in key rates of a quarter of a percentage point (or 25 basis points) in 2025. UBS, for its part, estimates that the central bank still has room to scope to lower its key rates by a total of 50 basis points this year.

In the context of a Fed “forced” to be patient, currency traders will carefully monitor the release of the consumer price index, the main measure of inflation, in the United States on Wednesday. Another advanced barometer of American inflation, producer prices will be published tomorrow. In the meantime, nothing to get your teeth into regarding economic statistics this Monday, whatever the side of the Atlantic.

At midday on the foreign exchange market, the Euro was trading against $1.0200 approximately

KEY GRAPHIC ELEMENTS

The reaction movement carried out at the beginning of the month, encouraged by press reports denied by D Trump, is already running out of steam.

This surge is not likely to counter the underlying bearish bias, but sends a legitimate message of protest. The 50-day moving average (in orange) continues to constitute a solid technical and graphical barrier.

Once perfect parity is reached, namely 1$ for 1€, a vigorous buyer reaction of protest could be put in place.

MEDIUM TERM FORECAST

Considering the key graphical factors that we have mentioned, our opinion is negative in the medium term on the EURUSD parity.

Our entry point is at $1.0210. The price target for our bearish scenario is at $1.0001. To preserve the invested capital, we advise you to position a protective stop at $1.0296.

The expected profitability of this Forex strategy is 209 pips and the risk of loss is 86 pips.

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