EUR/USD: a moving average that's a trailing stop

Traders continued to deal with the resolutely firm tone of the major central banks on both sides of the Atlantic, which met at their respective monetary policy committees last week.

"The FED but also the ECB and the Bank of England clearly reminded investors of reality at their monetary policy meetings last week," says Sebastien Grasset (Auris Gestion): "If the pace and magnitude of the key rate hikes will be, as expected, less (50 bps increase for the three central banks at their last meeting instead of the previous 75 bps), the fight against inflation is far from won and key rates will continue to be raised with certainly a maintenance at a high level for a longer time than the market bought."

A hawkish message, which has put investors "in their place", says Mr. Bay (IG France), and is causing the market to revise the shape of the rate hike curve, and the estimate of terminal rates.

"The message from central banks on both sides of the Atlantic is clear at the end of the year. The message from central banks on both sides of the Atlantic is clear at the end of the year: "Don't be too optimistic and don't consider that our monetary policy is essentially guided by the consumer price index". In other words, "it is certainly the employment indicators that will guide central bankers even more in order to measure the latitude in their monetary tightening action", adds S. Grasset.

However, the signals on jobs, particularly in the US, suggest that tensions will continue. The level of weekly unemployment benefit registrations, which are chronically close to 195,000, points in this direction.

Yesterday the single currency benefited from the IFO business climate index in Germany, which rose to 88.7, above expectations, while the dollar suffered from the publication of the first estimate of PMI for December, which completely missed expectations.

On the macroeconomic agenda on Tuesday, the consumer confidence index in the Eurozone at 16:00.

Right now, the pair is trading at $1.0617.

KEY CHART ELEMENTS
The 20-day moving average (in dark blue) continues to play its role as chart support. A positive view remains above this straight-line trend line.

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

Our entry point is $1.0597. The price target of our bullish scenario is $1.1189. In order to preserve the capital invested, we advise you to place a protective stop at $1.0434.

The expected return on this Forex strategy is 592 pips and the risk of loss is 163 pips.