EUR/USD: the bearish bias remains, but prepare for an eventual rebound of protest

The bearish energy released since Monday is fully expressed, sending the euro ever closer to parity with the dollar. If the opinion remains negative for the time being, our targets remaining locked, we warn against the possibility, within a few sessions, of a sharp rebound.

In terms of statistics, the US missed its targets on Wednesday, whether it was for the deficit, admittedly structural, in the balance of trade in goods, wholesaler inventories, pending home sales, or oil inventories. This did not prevent the dollar from continuing to rise against the euro, in the nervous context of a contraction in risk appetite, and against the backdrop of expectations of a particularly firm Fed FOMC meeting.

The Fed's rhetoric has become particularly firm since J. Powell clearly put on the table the option of a 50 basis point increase in Fed Funds, as of the next FOMC at the beginning of May, to deal with inflation whose "peak" no one sees. In addition to price dynamics, it will be particularly interesting to measure the evolution of tensions on the labour market, an essential criterion for predicting wage increases. The verdict will come at the end of next week with the April NFP report.

"The foreign exchange market has a strong conviction: Rate hikes are going to be significant in the United States in the coming months, which will support the US dollar," said William Gerlach, Country Manager France at iBanFirst, who confirms that "the US Federal Reserve's FOMC meeting scheduled for 3 and 4 May should mark an acceleration in the process of monetary normalisation in the United States in order to fight inflation (which reached 8.6% in March over one year and could easily climb to 9.9% by June).

Right now, the pair is trading at $1.0506!

KEY CHART ELEMENTS
Since breaking out of a broad consolidation wedge on 4 April, the short side has been confident, with 17 red bodies in the last 20 candlesticks. A break of a fragile intermediate floor at $1.0850, which we described as a guardrail, has released additional selling energy in a bout of volatility. This break now validated leads to the locking of new bearish targets, towards $1.0250. It will then be time to contrariously anticipate a powerful challenge rebound.

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 $1.0508. Our bearish scenario price target is $1.0251. In order to preserve the capital invested, we advise you to place a protective stop at $1.0566.

The expected return on this Forex strategy is 257 pips and the risk of loss is 58 pips.