EUR/USD: the pair is hoveing at a chart resistance level

Like the equity markets on both sides of the Atlantic, the Euro/Dollar has been on a roll since Friday, even though the fundamental situation has not changed: fears of a contraction in activity, particularly in the form of a US recession in 2023, remain valid. On this side of the Atlantic, the latest statistical figures illustrate both the fragility of the recovery and the lack of investor confidence.

In detail, on Thursday, traders took note of a salvo of activity indicators (the famous PMI, purchasing managers' surveys), all of which were off target... In synthetic data for the Eurozone as a whole, the manufacturing PMI (first estimate) stood at 52.0 in June, coming dangerously close to the 50-point mark which, by construction, separates a contraction from an expansion in the sector in question. For services, the score is 52.6 against 55.5 anticipated.

And on Friday, it was the turn of the IFO business climate index in the Eurozone's leading economic power to draw attention: the index was down to 92.3. "The German business climate has darkened," reads the press release accompanying the results of the survey. "Companies are somewhat less satisfied with their current business situation. Their expectations have become significantly more pessimistic. The threat of gas shortages is a major concern for the German economy."

"Despite Jerome Powell's talk of continued monetary tightening, investors are beginning to realise the risk of recession and are already anticipating a slowdown in monetary tightening in the coming months," noted Vincent Boy, market analyst at IG France.

This week will be rich on the statistical front, with in particular new inflation benchmarks, German and French, respectively on Thursday and Friday.

Right now, the pair is trading at $1.0603.

KEY CHART ELEMENTS
The failure to touch the 50-day moving average (in orange) is now in place, and bearish targets towards $1.0350 and $1.0250 are locked in. A close on the weekly lows in week 23 reinforced the bearish message. Further contact with the aforementioned trendline would further strengthen the quality of the entry point. This is exactly what happened on Wednesday, on a zone of convergence of two remarkable moving averages. Next test: $1.0350.

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 $1.0583. The price target of our bearish scenario is $1.0351. In order to preserve the capital invested, we advise you to place a protective stop at $1.0674.

The expected return on this forex strategy is 232 pips and the risk of loss is 91 pips.