EUR/USD: Traders have their eye on the central banks

Currency traders are timorous as central bankers are due to intervene tomorrow and Thursday. In the meantime, the euro consolidated its last leg up following the publication of PMI indicators in Europe that were worse than expected. In addition, this morning the business climate index in Germany, the IFO, deteriorated more than expected in July after a deterioration in June again weighing on the European currency. The US Central Bank and the European Central Bank are both expected to announce a simple 25 basis point rate hike. Investors will therefore be very attentive to speeches to arbitrate on the currency market. The central bank with the most hawkish tone will cause its currency to appreciate. Technically, we will monitor the declines in the euro on its 20-period moving average in daily data to position ourselves in the direction of the trend, therefore buying, in order to aim for 1.15 in the coming weeks.

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 $1.1065. The price target of our bullish scenario is at $1.1500. To preserve the invested capital, we advise you to position a protective stop at $1.0800.

The expected return of this forex strategy is 435 pips and the risk of loss is 265 pips.