EUR/USD: the bullish trend is reaffirmed

Benefiting from the positive impact of the vaccine news on risky assets and the assurance of a sustained accommodating monetary policy on both sides of the Atlantic, the euro continued its ascent today, and is now close to $1.20. UBS, in a research note dated today, expects the EPPP (Emergency Pandemic Purchasing Programme) to be extended for a few months and increased by €495 billion, from €1,355 billion to €1,850 billion. According to UBS, the TLTRO (Targeted Longer-Term Refinancing Operations) would be extended until mid-2022.

Verdict on 10 December to see to what extent UBS's expectations will be confirmed, and to what extent more generally the European Central Bank has the possibility to still pleasantly surprise the market in its dovish (conciliatory, accommodating) attitude.

On the macroeconomic side, risk appetite remains supported today by the publication overnight of the Chinese PMI indicator for industry at 52.0 for this month, well above expectations. To be followed closely this afternoon the Chicago PMI index at 15:45 (central European time) and the ongoing home sales at 16:00, as Wall Street reopens today after the Thanksgiving holidays. To be more specific, the American stock market opened on Friday for half a session, which was also ignored by a large fringe of traders.

KEY CHART ELEMENTS

The $1.19 having dropped without too much resistance, the spot continues its ascent towards the next threshold, the $1.1200. A thin working band between $1.19 and $1.20 is emerging for the most active traders, who will be anticipating an exit from the top of this range. We will then emerge from a vast summer of congestion.

MEDIUM-TERM FORECAST

In view of the key chart factors we have mentioned, our opinion is now positive in the medium term on the pair.

Our entry point is at $1.1199. Our target price for our bullish scenario is $1.2154. In order to preserve the capital employed, we advise you to position a protective stop at $1.1955.

The expected return on this strategy is 955 pips and the risk of loss is 35 pips.