EUR/USD: Powell contributed to a technical rebound of the EUR

The ongoing technical rebound of the euro against the dollar was fueled by the finally very accommodating tone of J. Powell, in his speech on Friday in the middle of the Jackon Hole symposium. No details were provided on the timing of the start of a reduction in the asset purchase program (tapering), namely that it remains conditional on a confirmation of the improvement in the health of employment.

In search of clarification on the evolution of the Fed's monetary policy, the markets have accepted the status quo announced by the head of the institution, and will now have to wait for the next meeting at the end of September to have a clearer idea on the monetary normalization to come.

"The overall view remains unchanged: it is a Fed that is very accommodative despite the nuance of the tap in the short term," summarises Tom Costerg, a senior US economist at Pictet Wealth Management. Powell remains more concerned about disinflationary forces than inflationary ones. He does not believe in a new post-Covid inflation regime. It is also a Fed that is much more sensitive to the U.S. economic and financial cycle, and therefore much more wary of taking a monetary error risk.

"Fed Chairman Jerome Powell gave a speech in line with expectations. In particular the horizon for the 'taper' remains for the end of the year, as already stated in the FOMC minutes, while he separates the taper from the first rate hike as expected, which for him meets a more demanding economic test." 

In terms of statistics on Friday morning, consumer prices in the United States (PCE measure) came out for the month of July in line with expectations, at +0.2% in monthly terms. 

Right now, the pair is trading at $1.1796.

KEY CHART ELEMENTS
The technical rebound that began on Friday, August 20, whose potential may not yet be completely exhausted, does not change the spot's downward trend. It even increases the interest of the bearish entry point. The general idea remains bearish and traders will be able to initiate "short" positions on the Euro / Dollar currency pair by locking in a target at $1.1485.

MEDIUM TERM FORECAST
Based on the key chart factors we have mentioned, our medium-term view on the Euro Dollar (EURUSD) is negative.

Our entry point is 1.1802 USD. The price target of our bearish scenario is 1.1487 USD. In order to preserve the capital invested, we advise you to position a protective stop at 1.1881 USD.

The expected return on this Forex strategy is 315 pips and the risk of loss is 79 pips.