EUR/USD: the dollar maintains its advantage

Although the forces were tending to balance out in the very short term, the pressure remains on the euro, on the monetary, graphical, technical and psychological levels, against a dollar whose earning potential has increased sharply in recent days, with the change in tone of the Fed. On the other hand, the ECB is not yet willing to take a tight monetary turn, so as not to risk breaking the growth momentum at the worst possible moment.

Mrs. Largarde, interviewed yesterday morning on France Inter, was reassuring, indicating once again that a change in monetary policy was not expected in the short term. "We consider that during the year 2022, [prices] will stabilize and decline gradually over the year," she explained, adding that this decline should continue in 2023 and 2024.

For all that, and while faced with equally high inflation on this side of the Atlantic, "the ECB should gradually adopt a less friendly attitude and bond rates are likely to rise again," for Frédéric Rollin, investment strategy advisor at Pictet AM, it is indeed the difference in aggressiveness between the two major central banks that will drive the currency pair. And for now, hostilities are stronger on the Fed side.

In terms of statistics, there were no surprises yesterday on inflation in the Eurozone: the final data for December of the consumer price index came out with an annualized increase of 2.5% (excluding volatile elements). Across the Atlantic, weekly jobless claims for the week narrowly missed expectations at 287,000 new units, while the Philly Fed manufacturing index rose to 23.1 points beating the target.

In the immediate future, traders will take note of the Eurozone consumer confidence index at 16:00 (EuroStat).

Right now, the pair is trading at $1.1328.

KEY CHART ELEMENTS
In our previous analysis of the leading currency pair, we warned of the "risk" of a false exit from the top, of an elongated wedge pattern. Here we are, and the expression of this false breakout has abruptly brought the spot against a 100-day moving average (in orange) with a sharp bearish bias. Traders will be able to gradually resume short positions in the EUR/USD spot by taking advantage of a much better entry point.

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 $1.1334. The price target of our bearish scenario is $1.1001. In order to preserve the capital invested, we advise you to position a protective stop at $1.1431.

The expected return on this Forex strategy is 333 pips and the risk of loss is 97 pips.