EUR/USD: an ascending pattern is pending validation

The market psychology on foreign exchange remains unchanged, risk averse, while the first signs of the impact of monetary policies on both sides of the US on inflation are palpable. A phenomenon that is being sustained because "in the Eurozone, the recent appreciation of the euro is also helping to keep inflation under control. Confidence in central banks is back. The tried and tested methods of central banks to manage destabilising inflationary pressures are working," says Muzinich & Co.

On Tuesday, currency traders took note of the ZEW confidence index for the German economy, which rose sharply, unexpectedly moving back into positive territory at 17. This is the first time since last February, "the month in which the war in Ukraine began" notes ZEW President, Professor Achim Wambach.

The score shows "a significant improvement in the economic situation over the next six months." The more favourable situation on the energy markets and the brakes on energy prices imposed by the federal government have contributed to this. In addition, export opportunities for the German economy are improving due to the lifting of Covid restrictions in China. As a result, profit expectations for export-oriented and energy-intensive sectors have improved significantly. The prospect of a further decline in the inflation rate is leading to improved expectations for consumer-related sectors.

The final data for the Eurozone consumer price indices, published at 11:00, did not deviate from the first estimates. Excluding food, energy, alcohol and tobacco, prices rose by +5.1% annualised in December.

Right now the pair is trading at $1.0846.

KEY CHART ELEMENTS
The exit from the range is now fully validated at the beginning of 2023. Two events to watch, on the technical front in the immediate future: the spot's attitude near its 20-day moving average (in dark blue) and the formation, in progress but not yet validated, of a combination of candles in the "ascending method". The fifth and final candle in this remarkable pattern is under construction.

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

Our entry point is $1.0865. The price target of our bullish scenario is $1.1260. In order to preserve the capital invested, we advise you to position a protective stop at $1.0695.

The expected return on this forex strategy is 395 pips and the risk of loss is 170 pips.