EUR/USD: the euro is under pressure between 2 major monetary meetings

Selling pressure remains firm on the EUR/USD today, with significant energy released since the breakout of a consolidation wedge (black dotted line on the chart). The dollar is gaining ground as bond yields rise, against the backdrop of a firming tone from a Fed that faces a dilemma: how to avoid the price/wage spiral without breaking the growth momentum. Board member Lael Brainard, not exactly known for being hawkish, had announced the colour earlier in the week, before the Fed's minutes confirmed this offensive tone.

The whole question of the likelihood of a soft landing is being asked. "During his speech on price stability, Powell acknowledged that the current context did not make a soft landing of the economy obvious," note the strategists at Lazard Frère Gestion in an economic note. "In other words, the Fed may have to implement a very sharp slowdown in growth to ease labour market pressures and curb inflationary pressures, which continue to build."

An offensive, not yet aggressive, tone that raises questions on this side of the Atlantic as well. "While inflationary pressures are expected to persist, the ECB will have", according to Thomas Giudici, co-head of bond management at Auris Gestion, "no choice but to accelerate the normalisation of its monetary policy, probably more quickly than the market anticipates, with a rate hike as early as September." The ECB will complete a meeting of its Governing Council next week.

Right now, the pair is trading at $1.0897.

KEY CHART ELEMENTS
The bearish bias is aligned with the short term, and the remarkable red body candle pattern on Thursday 24/02 illustrates the firm grip of the selling camp. With 5 red-bodied candles from March 1st to March 7th, and a continuous selling mobilization in week 09, the picture remains bleak. Especially since the exit of a wedge from the bottom has been fully validated.

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 $1.0879. The price target of our bearish scenario is $1.0686. In order to preserve the capital invested, we advise you to place a protective stop at $1.0951.

The expected return on this Forex strategy is 193 pips and the risk of loss is 72 pips.