EUR/USD: stagnating at parity

The dollar and the euro are neutralised in the very short term, under the parity, after speeches marked by a great firmness of the central bankers on both sides of the Atlantic, on the occasion of the conference of Jackson Hole in the second part of the last week. If the dollar retains its advantage as a safe haven, the euro may find momentary support in the prospect of a 75 bp rate hike next month.

Returning to price stability "will take time" and will result in "a long period of weaker growth" and "a slowdown in the labour market", the Fed President hammered home from the idyllic Wyoming valley. The central banker also warned that fighting inflation would "hurt American households and businesses". The Fed wants to bring price inflation down to around 2%, and this policy will have "a series of 'unfortunate costs'", he also said.

"This intervention has broken the prospect of having a rate cut from the beginning of 2023, which had allowed this bullish rebound, observed since mid-June," notes Vincent Boy, IG France, who also notes another source of concern, likely to weigh on risk appetite in the coming weeks: "China is trying to stem the slowdown in its economy and reduce tensions in the property market, by cutting rates and increasing support measures for the economy, in contrast to other global economies, but this does not seem to be enough for the markets, given the risks in the world's second largest economy."

In terms of statistics, Friday saw the publication of the first slowdown in price rises across the Atlantic. The core PCE consumer price index (the Fed's preferred measure) was published on Friday and came out adjusted for volatile elements at +0.1% in July, compared with a consensus of +0.2% and a monthly rate of +0.6% in June. Over a year it rose by 6.3% in July, marking a clear slowdown compared to June, when it rose by 6.8%.

While the statistical programme is virtually empty today, the agenda will gradually "ramp up" until Friday with, in particular, the consumer confidence index (Conference Board) on Tuesday, the ADP survey on US employment on Wednesday, the ISM manufacturing PMI on Thursday, and the long-awaited monthly federal employment report on Friday. This is an opportunity to measure more accurately the degrees of pressure on employment, which is a source of inflation.

Right now, the pair is trading at $1.0013.

KEY CHART ELEMENTS
At this stage, the frank return to parity looks like a pullback. The underlying bias remains strongly bearish, below a 50-day moving average (in orange) which carries significant chart weight.

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 $0.9968. Our bearish scenario price target is $0.9701. In order to preserve the capital invested, we advise you to set a protective stop at $1.0056.

The expected return on this forex strategy is 267 pips and the risk of loss is 88 pips.