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#1 15-07-2020 15:51:48

johnedward
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From: Paris - France
Registered: 21-12-2009
Posts: 2855
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EUR/USD: a reversal scenario at the top of the range

EUR/USD: a reversal scenario at the top of the range


The euro has been trading at the upper end of a wide range against the USD, against the backdrop of renewed hopes on the virus vaccine front. For the end of this month, Moderna announces that it was entering the final phase of testing a vaccine. Wall Street gained ground yesterday.

The market atmosphere is counter-intuitively still very nervous, with on the one hand the very complicated virus situation in certain regions of the world (India, Mexico, Brazil, United States) and on the other hand the resurgence of animosity in Sino-American diplomatic tensions.

Yesterday, China accused the United States of "sabotaging regional peace and stability", after statements by diplomacy chief Mike Pompeo considering Beijing's claims as "illegal". The US Secretary of State recalled that a tribunal of the Permanent Court of Arbitration in The Hague had ruled that China had no legal basis to claim "historic rights" on this area where it covets offshore resources (fisheries and hydrocarbons in particular). Donald Trump yesterday put an end to Hong Kong's preferential treatment, erasing Hong Kong's knowledge of its special economic status, in reaction to the National Security Law promulgated by Beijing.

On the statistical side, analysts were informed of the German ZEW index of economic sentiment. The indicator disappointed slightly by coming out below 59 points this month, down from 62.9 last month and a target of 59.9. As a reminder, the indicator, which is a barometer value, is calculated after a past question to investors and analysts on their 6-month projections on the economic environment of the Euro-Zone's leading economic power. On the other side of the Atlantic, consumer price indices last month exceeded expectations, regardless of the base used.

Right now, the EUR/USD is trading at $1.1426.

KEY CHART ELEMENTS

The EUR/USD is currently at the top of a very wide range, already identified (1.1179 - $1.1439), within which it has been drawing choppy and nervous variations since the beginning of last month. A contrarian stance may prompt the most active traders to initiate a sell position on the currency pair, aiming to return to the middle of the range.

MEDIUM TERM FORECAST

In view of the key chart factors we have mentioned, our opinion is negative in the medium term on the pair's exchange rate.

Our entry point is $1.1428. Our target price for our bearish scenario is $1.1201. To preserve the capital employed, we advise you to position a protective stop at $1.1491.

The expected return on this strategy is 227 pips and the risk of loss is 63 pips.

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