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#1 14-09-2021 09:08:28

johnedward
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From: Paris - France
Registered: 21-12-2009
Posts: 3132
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EUR/USD: the USD maintains an ascent

EUR/USD: the USD maintains an ascent


Given the lack of concrete information obtained from the last FOMC meeting or the last Governing Council of the European Central Bank, the market psychology remained the same on the EUR/USD, namely relatively wary of the risk represented by the euro, and relatively confident in the idea of having a more "rewarding" greenback in the long run.

As a reminder, the ECB's last Governing Council meeting, which noted the beginning of a reduction in its asset purchase program. But if the institution is going to slightly reduce the amounts allocated to the PEPP, the component set up last year in response to the pandemic ("Pandemic Emergency Purchase Programme"), it will continue to provide more liquidity by buying more securities than it recovers when the previously acquired bonds reach maturity. $1,900 billion "at least until the end of next March" still leaves ample room for support. Furthermore, the "classic" asset purchase program (if one can say so, since it is a tool that was unthinkable to imagine the ECB using before Mario Draghi's mandate) remains unchanged.

"At this stage, the ECB's position is logical and measured: a recalibration to face a demand that no longer needs to be stimulated as much and a constructive message on the economy," says Thibault Prebay, Head of Bond Management at Financière Arbevel in France.

On the statistical side, Friday's producer price index target overrun in August was in the greenback's favor. Also, there is good news on the Italian employment front, with the unemployment rate falling back below the symbolic 10% mark of the active population. The agenda will become denser throughout the week, though.

Right now, the pair is trading at $1.1825.

KEY CHART ELEMENTS
The technical rebound that began on 20 August, whose potential may not yet be completely exhausted, does not change the downward trend of the spot. It even increases the interest of the bearish entry point. The general idea remains bearish and traders will be able to initiate "short" positions on the pair by locking in a target at $1.1485.

Only a clear breach of the 100-day moving average (in orange) would validate a behavioural reversal. However, this underlying trend line is taking on an accentuated bearish bias. In addition, chart resistance is taking shape below $1.1880.

MEDIUM-TERM FORECAST
Given the key chart factors we have mentioned, our medium-term view on the pair is negative.

Our entry point is $1.1792. The price target of our bearish scenario is $1.1487. In order to preserve the capital invested, we advise you to position a protective stop at $1.1881.

The expected return on this forex strategy is 305 pips and the risk of loss is 89 pips.

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