EUR/USD: the selling buildup has freed itself

The final data on consumer prices in the Eurozone, published yesterday, are not likely to disturb the bearish bias of the Euro against the Dollar, whose earnings potential is considered much more favourable. EuroStat confirms an annualised price increase of 4%. The increase is even revised downwards for prices adjusted for volatile elements (food, energy, alcohol and tobacco), to 1.9%, against 2.0% initially calculated. Result: no (over)pressure on the ECB at this stage. The selling energy release of 10 November, when consumer prices were showing overheating, continues. In addition to these US CPIs, the markets will be able to deal next week with PCE prices (Personal Consumption Expenditures), the Fed's preferred barometer for taking the temperature of prices.

In terms of stats, U.S. retail sales for last month were published by the Census Bureau. Excluding cars, these sales jumped by 1.8% on a monthly basis, beating the consensus by a wide margin (+0.9%) and making us forget a lackluster September. This is an indicator with a strong stock market impact in an economy where traditionally the bulk of national wealth creation comes from domestic consumption.

Right now, the pair is trading at $1.1308.

KEY CHART ELEMENTS

Last Wednesday, we stated the following, as a reminder: "A break of the fragile support zone at 1.1530 would increase volatility. The working band between $1.1530 and $1.1675 would then be obsolete." This zone has given way, with validation from volatility. This has strengthened the selling current. Next bearish target locked at $1.1150. And this without excluding the possibility of a pullback to $1.1530.

Following this, a sharp reaction of protest will be considered.

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 $1.1316. The price target of our bearish scenario is $1.1151. In order to preserve the capital invested, we advise you to position a protective stop at $1.1361.

The expected return on this forex strategy is 165 pips and the risk of loss is 45 pips.