EUR/USD: The ECB is taking its time

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(News Bulletin 247) – The working matrix of the Euro/Dollar currency pair remains the same, with a Fed that is much more determined and firm than the ECB. European Central Bank which ended a new meeting of its Board of Governors on Thursday. The “turn of the screw” was only “verbal” in the words of Ronan Blanc, Manager Analyst at Financière Arbevel.

The ECB therefore continues to “take its time”, for Ulrike Kastens, Economist Europe, DWS. “Caught between high economic uncertainty and record inflation rates, it continues to be cautious. But at least it has decided to end net asset purchases in the third quarter of 2022. The ECB then made a point of stressing that it remains “data dependent”.

The single currency, one of the reference markers of risk appetite in the eyes of fund managers, continued to suffer from the war in Ukraine, which is clearly entering a new phase with the intensification of Russian operations in the Donbass.

It also included a share of risk as to the still uncertain outcome of the presidential election in the second power of the Euro Zone, France, an election which in the second round opposed the outgoing President, E Macron (progressive) to M Le Pen (sovereignist, eurosceptic).

To follow housing starts and building permits in the United States at 2:30 p.m.

In terms of statistics on Thursday, operators learned of a surprise rebound in the consumer confidence index (U-Mich, in preliminary data for the current month), to 65.7, well above expectations. Target beaten also for retail sales across the Atlantic (excluding automobiles), for the month of March.

At midday on the foreign exchange market, the Euro was trading against $1.0795 approximately.

KEY GRAPHIC ELEMENTS

Since its clear exit from a broad consolidation wedge on April 4, the selling side has been confident, with 7 red bodies over the last 8 candles drawn. A break of a fragile intermediate floor at $1.0850, which we described yesterday as a safeguard, would release additional selling energy, in a bout of volatility. This rupture is in progress, and requires validation. Our idea nevertheless remains bearish. The placement of the stop is clear and does not suffer from any ambiguity.

MEDIUM TERM FORECAST

In view of the key graphic factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).

Our entry point is at 1.0788 USD. The price target of our bearish scenario is at 1.0455 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0854 USD.

The expected return of this Forex strategy is 333 pips and the risk of loss is 66 pips.

CHART IN DAILY DATA

©2022 News Bulletin 247

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