EUR/USD: A busy week in terms of job reports

The forces remained momentarily balanced for the EUR/USD after crossing remarkable moving averages. The Euro, the risk currency of the financial markets, was holding up well as macroeconomic indicators from the world's major economic hubs pointed to a soft landing. The dollar remains on the lookout for particularly important US employment figures this week (JOLTS, ADP, weekly jobless claims, and NFP on Friday).

These figures, combined with recent PCE prices, could tip the balance towards an additional 25 or 50 basis points of Fed Funds for the next Fed policy committee. In the meantime, the Fed's boss, J Powell, is starting his traditional half-yearly hearings before the Parliament. The challenge is to rule out, definitively or not, the "nightmarish" hypothesis of a price/wage spiral.

For the state of tension on employment is not only strong, but chronic. "Jobs are plentiful in the US, but applicants are scarce," says Chris Scherrman, US economist at DWS, who observes that "there are twice as many job openings as there are job seekers. The last time the ratio was this high was at the height of World War II, when industry had to radically shift to arms production and many youths were serving overseas."

Right now, the pair is trading at $1.0673.

KEY CHART ELEMENTS
After gradual weakening from February 6 to 14, the 50-day moving average (in orange) finally gave way. This underlying trend line is now threatened by 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 crossing is done, validated and in addition in a relatively important angle.
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 $1.0686. 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 $1.0851.

The expected return on this forex strategy is 447 pips and the risk of loss is 165 pips.