EUR/USD: the euro helps us measure appetite for risk

In light of the lack of appetite for risk, the pair continued to bend over backwards, against a backdrop of heightened caution due to the imminent start of the quarterly round of the major American group reports, led by the banks. JP Morgan and Goldman Sachs, in particular, will take a beating.

"As 2Q results begin to be released this week, analysts this time are expecting earnings to rise by 59% on a yearly basis-a very ambitious number that could make pleasant surprises rare. Excellent results will be needed to maintain the current stock market momentum," comments César Perez Ruiz (Head of Investments and CIO at Pictet Wealth Management), referring to the companies in the S&P 500. However, any weakness in this stock market "momentum" could have consequences for other so-called risk asset classes.

Right now, the EUR/USD is trading at $1.1816.

KEY CHART ELEMENTS

The $1.2000 level has been ruthlessly broken, as has the 100-day moving average (in orange), which is currently undergoing a downward slope inflection. Friday's black marubozu* is the perfect chart and technical translation of the market psychology. The idea remains negative below the 20-day moving average (in dark blue). Note that the slope of the long moving average mentioned above is in the midst of affirming and validating a bearish inflection.

After a contentious reaction from June 21-23, the spot quickly reversed, tracing three long high shadows in a row.

A fragile guardrail $1.1848/$1.1850 is now broken.

We are keeping the 20-day moving average (in dark blue) as a benchmark below which the bearish idea remains fully valid.

*This type of candle, characterised by a long body, with no shadow, or almost no shadow, shows a continued mobilization of the side (seller in this case) on the time unit in question.

MEDIUM TERM FORECAST

Based on the key chart factors we have mentioned, our medium-term view is negative on the pair.

Our entry point is $1.1842. The price target of our bearish scenario is $1.1621. In order to preserve the capital invested, we advise you to position a protective stop at $1.1921.

The expected return on this strategy is 221 pips and the risk of loss is 79 pips.