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#1 17-09-2020 13:57:08

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: the $1.1750 support level is becoming fragile

EUR/USD: the $1.1750 support level is becoming fragile


In the aftermath of a FOMC meeting that came as no surprise, but which left Wall Street hungry, the euro came to test once again a key level of support, which now looks like a safeguard.

This FOMC Monetary Policy Committee meeting took on a particular tone, since it was the first meeting of this type after the major strategic orientations unveiled at the Jackson Hole symposium. The Monetary Institution headed by Powell decided on a monetary status quo, promising to keep its key rates at the floor until inflation "moderately", and for a "certain period of time", broke through the 2% mark.

"These new forecasts suggest that interest rates will remain at their current level until at least for the next 3 years, with inflation unlikely to exceed 2% by then," says John Plaserd (MIRABAUD), who says: "Overly dovish forecasts coupled with a marked improvement in the Fed's economic outlook seem to confuse traders. It will be a very long way to the November presidential elections...".

Keith Wade, Chief Economist & Strategist at Schroders, says: "This statement is not really a surprise, but it might disappoint those who are looking for more explicit indications on how policy would react to changing economic conditions. Nonetheless, it is consistent with previous meetings just before a presidential election where the approach has been to avoid saying or doing anything controversial".

On the statistical front, traders on Wednesday saw the European trade balance, showing a final July surplus of 19.9 billion, 1 billion above target. The June surplus was 16 billion. On the other side of the Atlantic, excluding automobiles, retail sales grew by only 0.6%, missing the target (+0.9%) and marked a slowdown in the previous month's momentum (+1.3%). A figure that does not go unnoticed, in an economy where consumption traditionally remains the main driver of national wealth creation.

For the time being, the figures of the final consumer price index data for August in the Euro Zone did not deviate from the first estimates. In particular, the CPI excluding trade, energy, alcohol and tobacco rose at an annual rate of 0.39% according to the latest EuroStat data. And -0.19% for the broadest product base, at an annual rate.

KEY GRAPHIC ELEMENTS

The currency pair is in a new phase of testing a chart support zone at $1.1745/$1.1750 which is becoming significantly weakened. In the event of a break of this threshold, with validation by volumes and weekly closing, a phase of significant ebb would take place. The most active traders will be able to anticipate this. All the more so since the chartist figure drawn above this line since 13 August is not very engaging.

MEDIUM-TERM FORECAST

With regard to 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 $1.1790 USD. Our target price for our bearish scenario is $1.1440. To preserve the capital employed, we advise you to position a protective stop at $1.1910.

The expected profitability of this Forex strategy is 349 pips and the risk of loss is 119 pips.

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