EUR/USD: the pair remains under pressure

In a foreign exchange market that remains largely "driven" by U.S. inflation, the Euro/Dollar currency pair was retreating after regaining contact with perfect parity.

"The longer inflation remains elevated, the greater the risk that it will become entrenched. In response, the Fed will have to be even more hawkish to bring it back to a more reasonable level", according to Alex Heze, strategist at Richelieu Group. "Consumption is resisting for the moment. It is even resisting too much for the Federal Reserve, which wants to slow down inflationary catalysts in all their forms at all costs, despite the "pain" that they could cause. Households have solidified their financial position during the pandemic due to government transfers, forced savings and a robust job market."

Employment will be discussed today, with the NFP (Non Farm Payrolls) report, the traditional monthly federal survey on employment, which will be used to gauge its robustness, but also its degree of tension, itself a source of inflation. Wednesday, the ADP (Automatic Data Processing) survey was its traditional "preview". The private human resources firm highlighted 208,000 new jobs in the private sector (excluding agriculture), compared to a target of 200,000.

Right now, the pair is trading at $0.9810.

KEY CHART ELEMENTS

We are resuming our bearish work on the EUR/USD currency pair, with a suitable entry point, following a pullback on parity and 50-day moving average. With the advantage of having a clearly defined stop loss level.

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 $0.9885. Our bearish scenario price target is $0.9501. In order to preserve the capital invested, we advise you to position a protective stop at $1.0001.

The expected return on this strategy is 384 pips and the risk of loss is 116 pips.