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#1 03-02-2021 10:42:38

johnedward
Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 3068
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EUR/USD: an effective trailing stop

EUR/USD: an effective trailing stop


In spite of less catastrophic "flash" data than expected on the growth of the Eurozone in the final quarter, the euro pushed down a support level against the dollar, and found on Tuesday midday levels unseen for more than a month. The dollar was asserting its attributes of a refuge currency, in the thick fog that forms the virus situation despite the deployment of vaccination campaigns on both sides of the Atlantic.

Concerning growth in the Eurozone, Eurostat flash data show a contraction of 0.8% of GDP in Q4, from one quarter to the next. The Reuters consensus (-0.9%) was more pessimistic. Over last year, the first estimate of the historical contraction of GDP in the Eurozone is 6.7%.

The vaccine campaign is logistically complex, with very disparate deployments in different EU countries. In addition, the emergence of new, more contagious variants continues to push governments to tighten restrictive measures, particularly in Europe.

Forex traders will gradually mock the start of negotiations in Congress on the new stimulus package initially proposed at $1.8 trillion by Joe Biden. "9 Republican senators proposed last weekend a new $600 billion business support package (including a $1,000 cheque, help for the unemployed, and a vaccine plan)," say CIC Market Solutions. "This proposal constitutes a window of opportunity to start negotiations because, with 9 Republican senators, a qualified majority of 60 votes out of 100 would be reached. However, the amounts used would be very low compared to the initial proposal and the aspirations of the "progressives" within the democrats" The strategists of CIC Market Solutions are counting on an envelope of $1,500 billion at the end of the debates.

In terms of statistics, no surprise on Monday morning regarding the publication of the PMI industrial activity indicators in final data for the month of December. In synthetic data for the Eurozone as a whole, the leading indicator comes out at 54.8, versus 54.7 in first estimates. Across the Atlantic, the manufacturing PMI (ISM) came out at 58.7, missing the target of 59.9 by 1.4 points.

As of right now, the pair is trading at $1.2017.

KEY CHARTS
Since the validation of the break of the 20-day moving average (in dark blue) on 12th January on increased volatility, the graphical profile of the Euro/Dollar currency pair has deteriorated. After many unsuccessful tests, this trend line has established itself as a valuable level of dynamic resistance. It will continue to play a trailing stop role in our bearish outlook on the spot.

MEDIUM-TERM FORECAST
In view of the key graphical factors we have mentioned, our opinion remains negative over the medium term on the pair's exchange rate.

Our entry point is $1.2041. Our target price for our bearish scenario is $1.1876. In order to preserve the capital employed, we advise you to position a protective stop at $1.2141.

The expected return on this forex strategy is 165 pips and the risk of loss is 100 pips.

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