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#1 04-01-2021 13:11:37

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: the bias remains in place for this year's start

EUR/USD: the bias remains in place for this year's start


The bias remained bullish on the currency pair at the beginning of 2021, marked by an acceleration, at clearly different rates depending on the country, of the vaccination campaign against the virus. The hope of control over the virus, and an eradication, supports risky assets, a family of which the euro is an eminent representative, in the same way as shares or the USD.

On the other side of the Atlantic, even if the objective of vaccinating 19 million Americans has not been reached, it must be noted that the vaccination campaign is off to a very strong start, quantitatively and qualitatively, with the Pfizer/Biontech and Moderna vaccines, for which no major undesirable side effects are to be noted at this stage. American support and confidence in the campaign is massive. The situation is different on this side of the Atlantic, with very disparate vaccine strategies and levels of adherence...

The start of the week is marked on the macroeconomic side by the publication of a battery of activity indicators (PMI) in industry. Synthetic and final data for the year in Europe as a whole came out at 55.3, not far from the target.

Chris Williams, Chief Business Economist at IHS Markit, comments on the latest PMI survey figures: "The manufacturing sector in Europe ended the year on a very encouraging note, with production recording one of its strongest growth rates since 2018. The good performance of industry despite the tightening of measures to limit the spread of the virus in the last 3 months contrasts sharply with the situation observed during the first lockdown: the manufacturing sector now provides crucial support to the region's economy, while the service sector is feeling the full impact of the strict social distancing measures".

"Thanks to the good performance of the manufacturing sector, the latest PMI data points to a much smaller quarterly contraction than the unprecedented contraction in the second quarter, and the highest degree of optimism in almost three years points to a consolidation of growth this year. However, the resurgence of virus cases in the coming months could continue to disrupt business activity and curb economic growth in the region," Williamson continued and concluded.

The Chinese Caixin PMI, published overnight, came out at 52.9, against 54.9 in November, 1.7 points below the target. Rendez-vous in one hour to find equivalent data for the United States.

Right now, the pair is trading at $1.2298.

KEY CHART ELEMENTS

Since 4 November, the currency pair, one of the benchmark markers of risk appetite in the eyes of fund managers, has been on a steady upward trend, without running out of steam, above a 20-day moving average (in dark blue), a trend line that acts as a support. The opinion will remain positive as long as the spot remains above it.

MEDIUM TERM FORECAST

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

Our entry point is at $1.2300. Our target price for our bullish scenario is $1.2624. In order to preserve the capital employed, we advise you to position a protective stop at $1.2164.

The expected return on this forex strategy is 324 pips and the risk of loss is 136 pips.

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