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#1 28-02-2023 21:44:00

johnedward
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From: Paris - France
Registered: 21-12-2009
Posts: 3597
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EUR/USD: A new technical matrix is appearing

EUR/USD: A new technical matrix is appearing


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The readjustment between the Euro and the Dollar continued in favour of the latter as the markets revised their plans on the shape of the Fed Funds curve.

Weekly jobless claims, U-Mich consumer confidence index, PCE retail price index... The second half of last week saw no shortage of data showing that the US economy is heating up, against a backdrop of chronic inflation and employment tensions. As a result, the foreign exchange market was faced with the reality of having to deal with Fed Funds that will remain high throughout the year, with no certainty about the value of the so-called terminal rates.

The highlight on Friday was the fact that PCE (personal consumption expenditures), the Fed's preferred measure of inflation, came in above target on Friday (+0.5% monthly against +0.3%).

"This data would therefore corroborate the new market scenario of a "no landing" (after the debates between the proponents of a "hard landing" and those of a "soft landing")," says Tom Giudici, head of bonds at Auris Gestion. "The other side of the coin of this growth revival is that the fall in inflation could take longer than expected, which, in the words of Yellen, will not happen "in a straight line". In this respect, the publication last Friday of above-expected PCE inflation, both monthly and annual, confirmed these fears."

Right now, the EUR/USD is trading at $1.0610.

KEY GRAPHIC ELEMENTS
After gradual weakening from February 6 to 14, the 50-day moving average (orange) finally gave way. This underlying trend line is now under threat from its 20-day counterpart (in dark blue). This would increase the strength of the sell signal. The crossings of these two remarkable moving averages have in fact been giving excellent signals for positioning and trade monitoring for many months. This crossover is underway, and at a relatively large angle.

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

Our entry point is $1.0610. The price target of our bearish scenario is $1.0239. In order to preserve the capital invested, we advise you to place a protective stop at $1.0711.

The expected return on this forex strategy is 371 pips and the risk of loss is 101 pips.

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