EUR/USD: violent movements on foreign exchange since customs announcements

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The dollar, the reference currency of international trade of the last 80 years, lost its superb in the context of the intense trade war waged by Donald Trump, which announced Wednesday of customs surcharge which is added to existing barriers: 34% for China, 20% for the European Union, 24% for Japan, 26% for India, for example. And this with a 10% floor for all countries of the world, just to forget anyone …

Never since the 1930s have customs barriers have been erected so high. A rhetoric of the fortress was developed by D Trump in the gardens of the White House: “Our country was looted, devastated and ransacked by enemy but also allied nations”, he complained to justify this brutal increase in the taxation of imports. And to create according to him the conditions for an industrial renewal, thanks to the relocation of factories to the United States.

“The process of relocating production channels, when envisaged, will take time. By then, some companies may have to adjust their prices, which could rekindle certain inflationary dynamics, in a context where the global economy remains fragile,” warns Raphaël Thuin, director of capital market strategies at Tikehau Capital.

“Any response from the countries concerned will cause climbing customs duties,” the subtle 47th president of the United States threatened.

“Such a negative political catalyst for the global economy rightly requires a revaluation of general perspectives. If the customs duties announced are implemented and remain at the expected levels, the risk of contraction of the global economy is certainly higher. This does not mean that the recession is certainty, but that the probability is now much higher”. And including in the United States, as the violent reflux of 10 years under 3.95%…

“The overall enhancement of customs taxes is not only intended to reduce the trade deficit, but also and above all to reduce the American deficit, at the risk of leading to an economic slowdown or even an economic contraction for a few months,” alerted Alexandre Baradez (IG France)

It is therefore in this stormy context that the trades will read this Friday, at 2:30 p.m. (Paris time) of the federal monthly report on the health of employment outside agriculture. A stable unemployment rate at 4.1% of the active population is expected, and creations of positions of around 137,000. No big surprise yesterday with weekly registrations for unemployment benefits, close to expectations, near 220,000.

At midday on the foreign exchange market, the euro was treated against $ 1,0985 approximately.

Key graphics elements

After the very clear crossing of $,0608 the pair of currencies had entered a long -range lateralization phase, a phase now finished. A bullish outing is in full expression, even though the Bollinger bands go away strongly.

Medium term

In view of the key graphic factors that we have mentioned, our opinion is positive in the medium term on Euro dollar parity (Eurusd).

Our entry point is 1,0989 USD. The course of course in our Haussier scenario is 1,1673 USD. To preserve the committed capital, we advise you to position a protection stop at 1,0844 USD.

The profitability hope of this Forex strategy is 684 pips and the risk of loss is 145 pips.

Daily data graphics