EUR/USD: risk appetite is contracting

The euro remains captive at the resistance threshold at $1.1745/$1.1750, in an anxious market, plunged in an artistic vagueness about the evolution of the virus situation, and with no certainty as to the outcome of the budgetary debates in Congress, one month before the presidential deadline. An already high-risk deadline, which could also be disrupted by Trump's positive virus test results.

On the budget issue, while the Democrats presented a $2.19 trillion aid plan to Congress earlier this week, taking more than $1 trillion away from an initial proposal in the hope of convincing the Republicans, the American media believe that Treasury Secretary Mnuchin has taken a step towards the Democrat camp by saying he is now open to an aid plan of around $1.6 trillion, when the Trump administration had previously ruled out disbursing more than $1 trillion.

Last Thursday, the day was marked by a series of industry activity reports, and the final data for last month revealed no surprises. For the Euro Zone, the manufacturing PMI in final data was confirmed at 53.6.

On the other side of the Atlantic, while household spending in August grew at a higher monthly rate than expected (+0.9%), incomes contracted by 2.6%, completely missing expectations. And at 55.3, slightly below expectations, the ISM Industrial PMI was slightly disappointing.

As of right now, the EUR/USD pair is trading at around $1.1733.

KEY CHART ELEMENTS
The break of the $1.1745/$1.1750 level, which released significant selling energy, is fully validated. A figure comparable to a shoulder, head and shoulder, has then given way. We are now moving towards the end of the formation of a short pullback (graphic rejection) towards this threshold, which has become a major resistance. The opinion will remain negative on the flagship currency pair, below the above-mentioned threshold and then below the 20-day moving average (in dark blue) whose bearish trend is strengthening.

MEDIUM-TERM FORECAST
In view of the key chart factors we have mentioned, our opinion is negative over the medium term on the Euro Dollar's exchange rate.

Our entry point is $1.1727. Our target price for our bearish scenario is $1.1441. To preserve the capital employed, we advise you to position a protective stop at $1.1811.

The expected return on this forex strategy is 286 pips and the risk of loss is 84 pips.