EUR/USD: US growth under scrutiny

In the midst of questioning the resilience of the European and American economies after years of restrictive monetary policy, the EUR/USD, one of the most reliable barometers of risk appetite on the markets, managed to hold its position at the within a thin ascending channel, the lower limit of which gradually turns into a "safeguard".

At the same time, traders remain tormented by the Fed's short-term strategy. Will it take a break at the end of the next FOMC next month, a way of recording the confirmation of a slowdown in inflation, or will it maintain a firm course for a few more months at the risk of weighing more on a weakened economy? Currency traders are therefore on the lookout for statistical publications on employment, inflation and growth. On this last point, the main driver of US growth is naturally domestic consumption. However, the "sacrosanct" index of consumer confidence (Conference Board) contracted on Tuesday, below the consensus, to 101.4.

Currency traders will naturally continue to be attentive to the consequences of the setbacks of three regional banking establishments on economic activity. "While being cautious about the possible contagion of the FRB's situation to other regional banks, in particular about large withdrawals of deposits which would weaken certain institutions," [the strategists of Banque Postale AM believe] believe "that the American authorities have all the means to restore calm and restore confidence."

"On the other hand [...], it is difficult to consider that this episode will not have consequences on the distribution of credit in the economy. Thus [...] the probable greater restriction of credit should accentuate the belt transmission of the ongoing monetary tightening. It is in this context that [LBPAM] maintains [its] scenario of a recession, even if moderate, in the United States by the end of the year."

Right now, the EUR/USD is trading at $1.0979.

KEY GRAPHIC ELEMENTS
The identified channel, drawn in black on the graph below, is currently seeing its lower limit tested quite nervously, with no clear signal. We will maintain, out of discipline, as mentioned in our previous analyses on the currency pair, our long positions within the channel, while being ready to make arbitrages if necessary, in the event of an exit from the bottom with confirmation in daily data.

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 $1.1040. 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 $1.0859.

The expected return of this Forex strategy is 419 pips and the risk of loss is 181 pips.