EUR/USD: A safety level that's about to give way

The euro continues its process of gradual weakening of $1.0645/$1.0650 against the USD, in a context of warming yields on 10-year US sovereign bonds, 10-year Treasuries, which were now flirting with 4% after a series of economic statistics showing a stronger than expected resilience of the American economy. The persistent pressures on employment, in particular, militated for the maintenance of a firm monetary policy on the part of the Federal Reserve (Fed).

Yesterday Tuesday, even as Wall Street started its week, due to a Monday holiday, PMI surveys (of purchasing managers) both exceeded analysts' expectations for US data, and even exceeded the bar 50 points for services. This is enough to generate tension on risky asset classes, a family of which the Euro is a part.

Note that the IFO business climate index in Germany came out at 91, a very slight increase, perfectly on target (the consensus).

Right now, the EUR/USD is trading at $1.0630.

KEY GRAPHIC ELEMENTS
After gradually weakening from February 6 to 14, the 50-day moving average (in orange) ended up giving way. This underlying trend line is now under threat from its 20-day counterpart (in dark blue). The sell signal would then gain in intensity if necessary. The crossings of these two remarkable moving averages have indeed provided excellent positioning and trade monitoring signals for many months.

MEDIUM TERM FORECAST
In view of the key graphic factors that we have mentioned, our opinion is negative in the medium term on the EUR/USD parity.

Our entry point is at $1.0643. The price target of our bearish scenario is at $1.0239. To preserve the invested capital, we advise you to position a protective stop at $1.0816.

The expected return of this forex strategy is 404 pips and the risk of loss is 173 pips.