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The Euro remained under pressure from its 20-day moving average against the Dollar, the day after the publication of rather reassuring inflation figures across the Atlantic, figures which will have had a marked impact on the technological side of the stock market, the Composite taking almost 2.50%. On foreign exchange, the impact is almost zero, and market psychology unchanged. It should be noted that the American 10-year bond nevertheless fell below 4.70% following the publication of these figures, before stabilizing around 4.65%, a level which remains firm.
On an annual basis and for the broadest basket of products, inflation stands at 2.9% across the Atlantic. Published on Tuesday, excluding food and energy, “producer” prices, which constitute an advanced barometer of inflation, came out stable, a good surprise compared to the consensus of +0.2% monthly.
“The good news from this report on inflation is that after three months of stagnation at 3.3%, underlying inflation resumed its downward movement in December (3.2%). This is clearly good news for the Fed”, judges Bastien Drut, of CPR AM.
However, these figures allow us to hope, and not to bury, the prospect of two reductions of 25 bps this year, for the remuneration of Fed Funds. Instead of only 25 bps.
The Euro showed some resistance at midday, with the publication of a consensus overrun concerning the monthly balance of its trade balance, at nearly 13 billion euros in November. We will closely monitor the following American figures at 2:30 p.m.: retail sales, weekly registrations for unemployment benefits and the Philadelphia Fed manufacturing index.
At the margins, the single currency also held up a little with the excellent performance of luxury stocks on the stock market, mechanically pulling up the CAC 40, after an impeccable publication by the Swiss Richemont.
At midday on the foreign exchange market, the Euro was trading against $1.0290 approximately.
KEY GRAPHIC ELEMENTS
The 50-day moving average (in orange) continues to constitute a solid technical and graphical barrier. In the shorter term, it is even its counterpart at 20 days (in dark blue) which acts as dynamic resistance. And this without the RSI oscillator positioning itself in the oversold zone.
Once perfect parity is reached, namely 1$ 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 $1.0287. The price target for our bearish scenario is $1.0001. To preserve the invested capital, we advise you to position a protective stop at $1.0391.
The expected profitability of this Forex strategy is 286 pips and the risk of loss is 104 pips.
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