EUR/USD: latest news on the pair

While a fringe of investors - as the month of October on the equity markets illustrates - are living on the hope of a slowdown in the Fed's tightening process, the outcome of yesterday's Fed monetary policy committee today is a frank opportunity to refine expectations of a "pivot". With the risk of a false start...

For Franck Diximier (Global CIO for Fixed Income Allianz GI), the Fed will "stay the course", i.e. that of an offensive monetary policy, with the aim of avoiding at all costs the entry into a price/wage loop. "The Fed has no choice but to focus on its core mandate of price stability and continue to act fast and hard", for the asset manager.

"The Fed remains in the logic inaugurated at its June meeting, with a higher-than-expected rate hike: it is a matter of proceeding with as many rate hikes as possible in the coming months before the window of opportunity closes. This is because the risk of recession, or at least that of a sharp deceleration in growth by the end of the year, is now anticipated by the markets. The Fed must therefore act now, in order to continue to anchor inflation expectations and restore its room for maneuver."

On the statistical front, new job openings (JOLTS) came in at 10.73 million, above expectations for September. A first indication of the pressure on US employment this week before the release of the weekly jobless claims today and the monthly federal NFP report on Friday.

The U.S. manufacturing PMI indicator came out yesterday down at 50.2, right next to the 50-point mark that separates, by construction, an expansion (above) from a contraction (below) in the sector under consideration.

In the immediate term, note the very sharp decline (45) in the German manufacturing PMI for October in final data, far from the first estimates (45.8).

Right now the pair is trading at $0.9878.

KEY CHART ELEMENTS

In a highly volatile environment, the currency pair has successively traced two marubozus in daily data, of equal magnitude, and comparable level, around the perfect parity, which continues to constitute a pivot level in the immediate future. The main issue now is positioning relative to the 50-day moving average (orange).

MEDIUM-TERM FORECAST

Based on the key chart factors we have mentioned, our medium-term view on the EUR/USD is negative.

Our entry point is $0.9899. 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 forex strategy is 398 pips and the risk of loss is 102 pips.