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#1 31-03-2021 13:26:52

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: a technical reaction is approaching on a struggling euro

EUR/USD: a technical reaction is approaching on a struggling euro


The euro, at the bottom of a bearish channel against the dollar, remains under pressure, and records its lowest level since 5 November. The single currency is clearly suffering from the blatant delay in the progress of the vaccine campaigns. The comparison between the two sides of the Atlantic is largely in favour of the United States, where Biden has doubled his already ambitious target of 100 million injections at the end of his first 100 days in office. By extension, it is the expectation of a stronger and faster recovery in the US that is supporting the greenback. Forex traders are also sensitive to the credibility of the upcoming massive US infrastructure investment plan. In his speech today, the White House may propose a plan (Build Back Better) of 2,000 billion dollars over 8 years.

Faced with problems of vaccine deliveries at the heart of a heated dispute between Brussels and London, the EU said on Thursday that it was ready to block AstraZeneca's exports, during a virtual summit which was also attended by US President Joe Biden. Emmanuel Macron also said that Europe will have to "improve" and "complete" its economic and budgetary response to the health crisis so that the recovery is "more vigorous" and does not diverge too much from that of the United States. The three largest economies in the Eurozone (Germany, Italy, France) have over the past few weeks gradually put in place regional and partial containment measures.

The main statistical publication yesterday was quite clearly in favour of the greenback: the Conference Board's index of US consumer confidence cheerfully broke the 100-point barrier, at 109.7, up nearly 20 points, well above expectations. And in the immediate future, traders' attention naturally turned to the Eurozone inflation figures, which have just missed expectations. In the first estimates by EUROSTAT for the month of March, prices in the monetary union rose at an annual rate of 1.3% for the broadest range of products, against a consensus of 1.4%.

Today, in the US, the Chicago PMI at 14:45 (European time), ongoing home sales at 16:00, and oil stocks at 16:30 pm. But also the publication of the traditional ADP survey on employment, a foretaste of the publication of the NFP report on Friday.

Right now, the EUR/USD is trading at $1.1730.

KEY CHART ELEMENTS

The Euro/Dollar currency pair has made an early exit from a wedge, a chart shape that is itself part of a broad bearish channel (black dotted line on the chart below). As the spot is about to make contact with the lower bound of this channel, a short-term bullish contrarian scenario is taking shape. The target is the upper bound. The message delivered is bearish within the channel and bullish in the form of a challenge reaction within the channel.

MEDIUM TERM FORECAST

Given the key chart factors we have mentioned, our medium-term view is positive on the EUR/USD.

Our entry point is $1.1735. Our bullish scenario price target is $1.1963. To preserve the capital invested, we advise you to place a protective stop at $1.1659.

The expected return on this strategy is 228 pips and the risk of loss is 76 pips.

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