EUR/USD: Powell is stingy with clues, it's up to us to find hints

The ongoing technical rebound of the euro against the USD was fueled by the very accommodating tone of Powell's 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 this sense, this Friday's publication of the federal report for last month will be important, and to a lesser extent, Wednesday's publication of the traditional survey by the private human resources firm ADP.

"However, ahead of the Jackson Hole meeting, several presidents of US regional central banks had made statements in favour of tapering, which could suggest a resolutely hawkish Fed," notes Tom Gudici, co-head of bond management at AURIS. "The market had also anticipated statements in this direction from Powell, with a rise in US 10-year rates of nearly 10 bps at the beginning of the week. However, most of these statements came from non-voting members of the FOMC, with the voting members of the committee having a more balanced, even slightly dovish tone."

Should we talk about a communication error or complacency on the part of Powell in the current US economic recovery situation? "It's possible," says Alex Baradez, head of market analysis at IG France, for whom US employment is also the focal point of the week. "The US jobs figures this week should therefore allow the markets to place the cursor and the timing of the tapering more precisely."

As a reminder, the July FOMC was excellent, with the unemployment rate falling to 5.3% of the labour force and job creation in the private sector (excluding agriculture) flirting with the symbolic 1,000,000 threshold.

In the immediate future, it is the surprise concerning inflation in the Eurozone that is supporting the rebound of the single currency. In the first estimates for the month of August, prices, in their broadest base, are up 3% in monthly terms and 1.6% excluding volatile elements, well above the target, according to EuroStat. It is essentially the surge in energy prices that is driving the first measure.

Right now, the pair is trading at $1.1836.

KEY CHART ELEMENTS

The technical rebound that began on 20 August, whose potential is perhaps not yet completely exhausted, does not change the downward trend of the spot. 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 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 pair is negative.

Our entry point is $1.1822. The price target of our bearish scenario is $1.1487. In order to preserve the capital invested, we advise you to position a protective stop at $1.1881.

The expected return on this Forex strategy is 335 pips and the risk of loss is 59 pips.