EUR/USD: The 20-day moving average puts pressure

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The renewed appetite for risk on the main European equity markets, particularly in France, allowed the Euro to “breathe” against the Dollar, the flagship currency pair marking a break below its 20-day moving average (in blue dark). But the backdrop, the general working framework, remained the same, despite reassuring figures on American inflation published earlier in the week. The underlying bias therefore remains bearish, due to the dichotomy in the monetary policies of the Fed and the ECB for the months to come.

Inflation figures which will therefore not revolutionize the attitude of the Fed, forced to be patient, in 2025.

“The influential president of the New York Fed, John Williams, declared yesterday that “government policy is the main source of uncertainty”. And even Austan Goolsbee, nevertheless “dove” of the Fed, declared that “ If Congress and the President decide on policies that increase prices, the Fed must take them into account.” notes Alexandre Baradez (IG France).

“The fight against “sticky” inflation is not over for the Fed, and the tone of the monetary institution’s communications is not expected to change until, at least, March and the next quarterly projections.”

On this side of the Atlantic, the final consumer price data for December has just been published, with no deviation from the first estimates. Excluding volatile items (food, energy, alcohol and tobacco), prices increased by 2.7% annually, at the same rate as in November.

To follow at 3:15 p.m. the monthly report on American industry (production volumes and capacity utilization rate).

At midday on the foreign exchange market, the Euro was trading against $1.0300 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 $1.0301. The price target for our bearish scenario is $1.0001. To preserve the invested capital, we advise you to position a protective stop at $1.0416.

The expected profitability of this Forex strategy is 300 pips and the risk of loss is 115 pips.

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