EUR/USD: the USD reclaims its refuge currency status

The Euro, the mirror of the appetite for risk on the markets, continues to decline against a dollar which is regaining its safe-haven attributes, in the context of growing fears about the health of the global economy, fears focused throughout particularly on two giants, Germany and China.

Thomas Giudici (Auris Gestion) says: “After decades of unbridled growth, based on cheap exports and the distribution of credit, the transition desired by Xi Jinping towards a “new normal” will not be smooth.”

“Indeed,” continues the head of bond management, “the shift towards an economy based more on household consumption, services and advanced technologies rather than exports leads to growth of certainly better quality but less strong. The landing is therefore difficult to manage for China while the post-covid global economy has been profoundly modified (desire to relocalise certain key industries) and is currently experiencing a slowdown."

The country's economic situation is the subject of concern after a slowdown in services activity last month. The PMI-Caixin services index actually fell to 51.9 points in August, after 54 in July. The very strategic real estate sector, the clay-footed colossus of the Middle Kingdom, continues to attract attention.

In terms of Tuesday's stats, note the significant disappointment in the final French services PMI data, at 46.1 points, significantly below the very first estimates for the month of August. Remember that after having digested the report on US, published Friday, currency traders took note on Tuesday of the Sentix index of investor confidence in the Eurozone, down sharply to -21.4, missing expectations that were pessimistic.

The American 10-year remains particularly firm at 4.255%.

Right now, the EUR/USD is trading at $1.0733.

KEY GRAPHIC ELEMENTS
The almost complete retracement of July's gains does not militate at this stage for a continuation of the advance of the currency pair, without formally excluding it. This retracement, by its magnitude, weakens the bullish message then delivered over a good part of the month of July. The outcome of the ongoing test of the 50-day moving average (in orange) will be decisive. The bearish message takes shape with the break - now validated - of the 50-day moving average by its 20-day counterpart (in dark blue), at an important angle. The short position will be retained as long as the latter gravitates below the first. The advantage of this investment plan is the discipline that it inherently induces.

MEDIUM TERM FORECAST
Considering the key graphical factors that we have mentioned, our opinion is negative in the medium term on the EUR/USD.

Our entry point is at $1.0730. The price target for our bearish scenario is at $1.0436. To preserve the invested capital, we advise you to position a protective stop at $1.0801.

The expected profitability of this forex strategy is 294 pips and the risk of loss is 61 pips.