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#1 22-11-2022 09:11:48

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: lacking fuel, the euro loses ground

EUR/USD: lacking fuel, the euro loses ground


The single currency fell sharply against the dollar as confirmation that the Fed would continue its aggressive monetary policy took hold.

While the slowdown in US CPI growth a fortnight ago had suggested a relative softening of the Fed's monetary policy, signs of further tightening have subsequently multiplied. James Bullard, the president of the St Louis branch of the US Federal Reserve, known for his "hawkish" positions, declared that rates would have to rise above 5% to curb inflation. The same observation was made by Christine Lagarde. The President of the European Central Bank insisted on Friday that interest rates should continue to rise in order to calm the rise in prices.

On the European side, the latest economic and investor confidence indicators have finally started to rise. "In the eurozone, the November ZEW survey surprised sharply upwards this week, in line with the rebound already seen in the Sentix survey," notes Nomura's strategists. "Is the peak of pessimism behind us? [This] may be the case for future expectations, partly because of all the fiscal measures announced by various eurozone countries; however, we expect the components of current conditions to continue to fall as the impending recession takes hold. Even the ECB has increasingly acknowledged that a recession is likely, giving it an 80% probability."

The week will be statistically rich, with the first estimates of activity indicators (PMI), for services and industry, at its heart on Wednesday. The industrial component for Germany is expected at 45.2 for the current month.

Right now, the pair is trading at $1.0269.

KEY CHART ELEMENTS
The very significant high wick on Tuesday 15/11 heralded the start of a consolidation phase that is taking a corrective turn towards the 20-day moving average (in dark blue). Below it, the return to a perfect parity 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 $1.0239. Our bearish scenario price target is $1.0001. In order to preserve the capital invested, we advise you to place a protective stop at $1.0335.

The expected return on this forex strategy is 238 pips and the risk of loss is 96 pips.

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