EUR/USD: the ZEW index - while still negative - is gaining ground

The dollar continued to fall against the euro after the publication on Thursday of the first signs of a flattening of the price increase curve, suggesting that the end of the tunnel is not in sight, but that there is hope of a softening of the Fed's tone at the next monetary meetings. It should be pointed out that this "decline in inflation is mainly linked to the health sector", warns Vincent Bay in particular, who means that the change in methodology for calculating health costs has a significant impact on CPIs. Furthermore, as Jeanne Asseraf-Bitton, Head of Research and Strategy at BFT Investment Managers, points out, "prices of services excluding energy remain firm due to the "housing" component which is still accelerating. As a reminder, in October, on an annualised and seasonally adjusted basis, prices excluding food and energy rose by 6.2%.

The euro, as a barometer of risk appetite, remains supported in the immediate term by hopes of a gradual easing of the drastic anti-Covid measures in China, and by the publication yesterday of a jump in the ZEW index of confidence in the German economy, from -59.1 to -36.8. "The ZEW indicator of economic sentiment in the Eurozone's largest economy rose again in November. This is probably linked above all to the expectation that inflation rates will soon fall. In that case, policymakers would not have to rein in monetary policy as hard. However, the economic outlook for the German economy is still clearly negative," comments ZEW President Professor Achim Wambach on current expectations.

However, the first estimates of the change in GDP in the Eurozone in Q3, at +0.1% quarter-on-quarter, come as no surprise.

Right now, the pair is trading at $1.0424.

KEY CHART ELEMENTS
The single currency reached levels not seen since August, and for the first time since September 21, and managed to amplify its excursion beyond the level of perfect parity. The crossing of two remarkable moving averages (20d on 50d) is validated. The next test is underway, that of a resistance level around $1.0350. Beyond this, a more extensive recovery of the euro could be considered.

MEDIUM-TERM FORECAST
Given the key chart factors we have mentioned, our medium-term view is positive on the EUR/USD.

Our entry point is $1.0406. Our bullish scenario price target is $1.0649. In order to preserve the capital invested, we advise you to place a protective stop at $1.0299.

The expected return on this forex strategy is 243 pips and the risk of loss is 107 pips.