EUR/USD: A steep ascending tunnel

Buoyed by a range of favorable elements, the euro remains well oriented against the dollar, above its 20-day moving average (in dark blue far below).

Currency traders digested the idea that the US terminal rates (top of the Fed Funds) had been reached, or almost reached. A scenario supported in particular by the confirmation last week, by the CPIs (consumer price indices) and by the PPIs (producer price indices).

"The latest inflation data in the United States sent reassuring signals about the transmission of monetary tightening," says Tom Giudici, head of bond management at Auri Gestion. "These reports should thus prompt the Fed to raise its key rates by a final 25bp in May before pausing. Contrary to market expectations, the central bank is unlikely to lower its key rates this summer; the road to disinflation is following its course but is still too slow and, as the president of the Richmond Fed reminded us, we are still far from the 2% objective!"

So certainly there is still a long way to go for the Fed, which is however more advanced in its cycle than the ECB, which could play in favour of the single currency in the coming months.

Right now, the EUR/USD is trading at $1.0967.

KEY GRAPHIC ELEMENTS

Within a thin, steep channel above its 20-day moving average (in dark blue), the euro continues to gain ground against the dollar in the immediate vicinity of its all-time highs. There is no immediate technical signal for a bearish reversal. We have depicted the steep channel in black on the chart below.

MEDIUM TERM FORECAST

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

Our entry point is at $1.0965. The price target of our bullish scenario is at $1.1459. To preserve the capital invested, we advise you to position a protective stop at $1.0795.

The expected return of this forex strategy is 494 pips and the risk of loss is 170 pips.