EUR/USD: 10-year Treasury bonds remain firm above 3.73

The EUR/USD was in the process of breaking its 50-day moving average (orange), a major dynamic benchmark, as rate tensions re-emerged, against the backdrop of the market's acceptance of continued firm and aggressive monetary policy on both sides of the US.

The vast majority of central bankers reaffirmed that the Fed's and ECB's monetary tightening was not over. "This is leading to a rebound in interest rates that cancels out the drop that followed last week's central bank meetings, when Lagarde/Powell seemed less harsh," says Xavier Chapard of La Poste Asset Management.

Japanese bank Nomura focuses, in a market note published on Monday, on the potential impact of the latest German inflation figures (CPI at 9.1% year-on-year, above the initial estimate of DeStatis, at 8.7% in the first estimates for January). "Could German inflation be annoying the ECB?" ask Nomura strategists. "It might not worry the ECB any more than it already is. The ECB has been clear that core inflation remains high and that there are near term upside risks. The language used since the last Governing Council confirms this. Indeed, this is one of the main reasons for another likely 50 basis point rate hike at the March meeting."

On the statistical front, preliminary data from the U-Mich consumer confidence index beat expectations by rising to 66.6 points. The statistical agenda, which was particularly poor on Monday, will become denser today, with new US inflation data.

The 10 year Treasuries remained firm above 3.70%.

Right now, the EUR/USD is trading at $1.0755.

KEY CHART ELEMENTS
The 50-day moving average (in orange), a dynamic support that we have used a lot in our work on the currency pair in recent months, is in the process of breaking down. All that is missing is an acceleration in volatility to fully validate this break, which follows a gradual weakening from 7 to 10 February.

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 $1.0694. The price target of our bearish scenario is $1.0436. In order to preserve the capital invested, we advise you to place a protective stop at $1.0805.

The expected return on this forex strategy is 258 pips and the risk of loss is 111 pips.