EUR/USD: a critical point at the top of the channel

The Euro/Dollar was back to levels not seen since the middle of last month, in close proximity to the upper end of a downtrend channel, against a backdrop of almost no reaction in LT government bond yields on Tuesday to the release of much anticipated inflation figures.

US consumer prices, the leading measure of inflation, released on Tuesday by the Bureau of Labor, exceeded expectations (except for Jefferies) across all product baskets. In particular, excluding food and energy (items considered volatile), these prices rose last month by 0.3% (against a target of 0.2%).

On the virus front, "the temporary halt in J&J vaccine distribution should not disrupt the vaccine campaign in Europe as it only represents a 15% supply of all vaccines", reads a morning note from Natwest.

Right now, the pair is trading at $1.1983.

KEY CHART ELEMENTS
The spot is now moving in the (very) upper part of a descending channel, in the immediate vicinity of the upper boundary of this corridor, which constitutes a graphic obstacle. The negative scenario, which remains valid within the channel anyway, may once again result in short trades on the EUR/USD, with the lower bound of the channel in view.

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

Our entry point is $1.1956. Our bearish scenario price target is $1.1656. In order to preserve the capital invested, we advise you to place a protective stop at $1.2041.

The expected return on this forex strategy is 300 pips and the risk of loss is 85 pips.