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#1 18-10-2021 11:43:47

johnedward
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From: Paris - France
Registered: 21-12-2009
Posts: 3176
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EUR/USD: the bearish bias remains in place

EUR/USD: the bearish bias remains in place


The easing of US long rates, combined with the start of the quarterly banking sector's rather promising results, has enabled the currency pair to momentarily get its head above water. Its fundamental bias remains negative, however.

In terms of last week's stats, the markets took note of the producer price index in the US, which was largely below expectations, adjusted for food and energy (+0.2% over September at a monthly rate). In addition, weekly jobless claims fell back below the 300,000 mark, whereas the consensus was for less encouraging figures. As a reminder, in data adjusted for changes in food and energy, consumer prices published the day before were up by 0.2%, in line with expectations. However, in their broadest base, they rose by 0.4% in monthly terms, exceeding the target.

"The evolution of inflation is increasingly worrying investors who do not see its decline taking place as quickly as expected," says Vince Guenzi, strategist at Cholet Dupont. "Indeed, the current conditions are in favour of inflation only falling significantly in the first half of 2022. This temporary rise shouldn't fuel a price-wage inflationary spiral or provoke an epidermal reaction from the US or European central banks, but the uncertainty on this subject could continue for some time."

Vince Manuel, Investment Director at Indosuez Wealth Management, agrees: "This inflation figure for September is relatively close to the consensus and validates the thesis we have been defending for several months of a high inflation plateau in the second half of 2021 and at least until the beginning of 2022. It does not fundamentally change the outlook for the timing of the Fed's tapering expected by the end of the year".

Right now, the pair is trading at $1.1588.

KEY CHART ELEMENTS
We recently said that there was no need for a pullback to the $1.1675 area to "confirm" the market psychology in place. This is exactly what happened, which says a lot about the impatience of the selling camp. For the time being, the view will remain negative below the 20-day moving average (in dark blue), which can be used as a trailing stop. We are locking in new bearish targets at $1.1360 and $1.1150.

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

Our entry point is $1.1605. The price target of our bearish scenario is $1.1361. In order to preserve the capital invested, we advise you to place a protective stop at $1.1675.

The expected return on this Forex strategy is 244 pips and the risk of loss is 70 pips.

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