EUR/USD: all eyes are on the Cintra ECB meeting

In suspension pending the intervention of the big money makers in Europe, on the occasion of the annual forum of the European Central Bank in Sintra (Portugal), the spot Euro: Dollar remained nailed under a zone of convergence of its moving averages to 20 and 50 days, in a delicate technical position.

The main news today for traders, published even before the intervention of Mrs. Lagarde: the European Central Bank is considering a mechanism of "sterilisation" of its purchases of bonds of more fragile States of the euro zone (to avoid the famous fragmentation) by encouraging commercial banks to place on deposit with it more liquidity (thus to withdraw this liquidity from the system) via subsidized rates, according to the Reuters agency citing two sources.

The details of the new "anti-fragmentation" tool will be announced at the next Governing Council monetary policy meeting on 21 July. According to information from Reuters published before Christine Lagarde's speech, the ECB could withdraw liquidity from the banking system in order to compensate for purchases of sovereign bonds (and thus limit the money supply in circulation to bring down inflation).

Right now, the pair is trading at $1.0525.

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 $1.0574. Our bearish scenario price target is $1.0251. In order to preserve the capital invested, we advise you to place a protective stop at $1.0691.

The expected return on this Forex strategy is 323 pips and the risk of loss is 117 pips.