EUR/USD: the dollar is performing well as a refuge investment

The short-term bias continued to align with the medium-term bearish bias on the pair, with the greenback asserting its safe-haven attributes as Russian military offensives into Ukrainian territory are in full swing. And that the economic sanctions targeting Russia will undoubtedly have an impact on our own Western economies. In particular Germany, which is heavily dependent on Russia for its natural gas supplies.

Risk appetite is drying up in this context, especially since Moscow placed its nuclear arsenal on "high alert" this weekend. "Following these various announcements over the weekend, investors should turn to the U.S. dollar as a reserve exchange value, but also to the gold price," says Vince Boy at IG France.

The question now is to what extent the Fed will opt for a looser monetary turn. "As a reminder, the US Federal Reserve is due to end asset purchases at the beginning of March, before raising rates at the FOMC meeting on 15 and 16 March. The current situation, and in particular the run on the dollar, could put a stop to this schedule to allow it to support the monetary system. The probability of a 50 bp rate hike has dropped sharply over the weekend, from 25% to only 5% this morning," says Boy.

On the statistics side, the main macroeconomic figures were relegated to the background on Friday despite their satisfactory nature, whether for PCE prices, durable goods orders and household income and spending in the United States.

The powerful monetary institution meets in March its Monetary Policy Committee (FOMC) and until now, a double increase (50 bps at once) of the Fed Funds was likely.

Right now, the pair is trading at $1.1220.

KEY CHART ELEMENTS

The transition phase between 4 and 23 February, in the form of a non-federation slide below the 100-day moving average (orange), is over. The bearish bias is aligned with the short term, and the red body of a remarkable candle on Thursday illustrates the firm grip of the selling camp. We are revising our bearish targets to $1.10, and then if necessary to $1.0856.

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 $1.1210. 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 $1.1306.

The expected return on this forex strategy is 209 pips and the risk of loss is 96 pips.