EUR / USD: Small pause towards $ 1.1340, undisputed bearish bias

(News Bulletin 247) – The final consumer price data in the Euro Zone, published yesterday, are unlikely to disrupt the bearish bias of the Euro against a Dollar whose potential for “remuneration” is considered much more favorable. EuroStat has confirmed, on an annualized basis, a price increase of 4.1% in the monetary union. The increase is even revised downwards for prices corrected for volatile elements (food, energy, alcohol and tobacco), to 2.0%, against 2.1% initially calculated..

Result: no (over) pressure exerted on the European Central Bank (ECB) at this stage. The sell-off energy release of November 10, as consumer prices showed overheating, continues. In addition to these American CPIs, the markets will be able to compose next week with PCE prices (Personal Consumption Expenditures), the Fed’s favorite barometer for taking price temperature.

“The risk of a lasting recovery in inflation in developed countries does exist,” warns Frédéric Rollin, investment strategy advisor at Pictet AM. “In the event that inflation lasts for several months, it settles in people’s minds. Households then accept higher prices and businesses raise prices and wages. If governments and central banks do not slow down this process , or rather encourage it, then inflation can set in. A glaring example is that of the indexation of wages to prices introduced in Italy at the end of the 1970s, the escalator, which led to a long period of price instability “analyzes and illustrates it.

To be statistically complete yesterday, a slight disappointment to be reported across the Atlantic, with housing starts showing stable in October, below expectations.

To follow on the statistical agenda this Thursday, as a priority, the manufacturing index of the Philadelphia Fed (the Philly Fed) and the weekly entries for unemployment benefits at 2:30 p.m.

At midday on the forex market, the Euro was trading against 1,1340$.

KEY GRAPHIC ELEMENTS

We clarified the following on Wednesday, as a reminder: “A break in a fragile support zone at 1.1530 would increase volatility. The working band between $ 1.1530 and $ 1.1675 would then be obsolete.” This zone gave way, with validation by volatility. The current seller is thereby strengthened. Next bearish target locked at $ 1.1150. And this without excluding the possibility of a pullback on the $ 1.1530.

As a result, a sharp punctual reaction of protest will have to be considered.

MEDIUM-TERM FORECAST

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

Our entry point is at 1.1340 USD. The price target for our bearish scenario is at 1.1151 USD. To preserve the committed capital, we advise you to position a protective stop at 1.1387 USD.

The expected return on this Forex strategy is 189 pips and the risk of loss is 47 pips.

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