EUR/USD: a bottom-of-tunnel reaction scenario remains in place

In the absence of major news, in particular on the statistical front, the EUR/USD continues to regain support at the bottom of the bearish channel, in a forex market that remains particularly attentive to developments in the virus epidemic, especially in Europe, where the three largest economic powers of the Eurozone (Italy, France, Germany), still impose targeted, regional and temporary lockdown measures. The pace of the vaccination campaign is more than ever in favour of the US, and this is one of the keys to explaining the momentum of the pair over the past 2 weeks. While his goal of 100 million injections in the first 100 days in office will be blown up, Joe Biden has doubled it to 200 million vaccine injections in the same time frame.

In terms of Friday's stats, the IFO business climate index in Germany came out with a surprise rise to 97, above expectations, at the highest since June 2019. "Despite the pace of Covid infections in Germany, business leaders are heading into spring with a growing sense of optimism," the IFO Institute said. Across the Atlantic, traders saw the goods trade deficit (-$86.7bn), narrowly missing the February target, and household income and spending, close to expectations. At 85, the revised U-Mich consumer confidence data came in above target.

There are no major figures on the macroeconomic agenda today, but the week will be relatively busy on that front, with the Conference Board's Consumer Confidence Index tomorrow, the first estimate of March inflation in the Eurozone on Wednesday, the US ISM Manufacturing PMI on Thursday, and the NFP Employment report on Friday.

Right now the EUR/USD pair is trading at midday on the foreign exchange market, the Euro was trading at around $1.1771.

KEY CHART ELEMENTS
The EUR/USD pair has made an early exit from a wedge, a chart pattern that is itself part of a broad bearish channel (black dotted line on the chart below). As the spot is about to make contact with the lower bound of this channel, a short-term bullish contrarian scenario is taking shape. The target is the upper bound.

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

Our entry point is $1.1774. Our bullish scenario price target is $1.1999. To preserve the capital invested, we advise you to place a protective stop at $1.1689.

The expected return on this strategy is 225 pips and the risk of loss is 85 pips.