EUR/USD: US 10-year rates have leveled off at 3%

Risk appetite continued to deteriorate, with further nervous movements in US long rates, with 10-year Treasuries breaking through the 3% mark, amid persistent concerns about inflation. Forex traders will have an interesting benchmark from Friday with the various CPIs (consumer price index) across the Atlantic. At stake is the estimation of the Fed's degree of aggressiveness in the months to come... For the time being, the risk appetite we mentioned above is contracting: the barometers that are the equity markets and the Euro/Dollar are converging towards the same idea.

"The Fed (US Central Bank) will not be able to mitigate the "overheating" of its economy without causing a marked slowdown," warn Groupama AM's strategists. "Barring a surprise easing on energy, this context of mistrust and tension on rates should remain in place at least until the ECB meeting on Thursday where the markets are waiting for details on the intensity and timing of the next rate hikes," for Alexandre Baradez (IG France) The outcome of the ECB Governing Council is expected on Thursday at 13:45. The traditional press conference will follow at 14.30pm.

The bad macroeconomic surprise of the day is definitely the dynamics of German industrial orders, which contracted by 2.6% in April in monthly terms, completely missing expectations. As a reminder, in March the contraction was -4.1% (updated figures).

Right now the pair is trading at $1.0688.

KEY CHART ELEMENTS
The spot has just fallen back below its 50-day moving average (in orange), a trend line with a persistent downward bias. A daily candle closing well below the lower shadow of the Tuesday 31/05 candle would give more substance to the bearish scenario. The view remains bearish but with no clear sign at this stage of a potential increase in volatility. The stop is clearly identified, just above the weekly highs (week 22) reached on Monday 30/05.

MEDIUM-TERM FORECAST
Given the key chart factors we have mentioned, our medium-term view on the EURUSD is negative.

Our entry point is $1.0666. Our bearish scenario price target is $1.0455. In order to preserve the capital invested, we advise you to place a protective stop at $1.0776.

The expected return on this forex strategy is 211 pips and the risk of loss is 110 pips.