EUR/USD: the end of a wedge pattern

Flat calm on the EUR/USD today, the currency pair completing the pattern of a short wedge as FED officials (Bowman and Barkin) will speak on Monday, on the eve of the release of US consumer price figures. Info potentially important to refine the cumulative extent of Federal rate cuts over the entire year 2024.

Regarding US inflation, prices are expected to rise by 3% on an annual basis, including food and energy. So, we'll meet tomorrow at 14:30 (EU time) to see the release. Traders will also appreciate, if applicable, the deviation from the target of the ZEW index of confidence in the German economy, with the index expected to rise to 17.5 points.

"The Fed is still at 5.25%-5.50% with no visibility on the date of the first rate cut or the pace of rate cuts in 2024. The market continues to anticipate 5 Fed rate cuts this year, via Fed Funds Futures, while the Fed in its recent projections anticipated only 3 cuts of 25 basis points each," says Alex Baradez, market analyst for IG France.

At the end of last week, the euro remained under pressure due to chronic concerns about the health of industry in the monetary union. Following the publication of production volume figures in Italy on Friday morning, Nomura analysts make the following observation:

"On the basis of 87.6% of the national data received so far (including Italian data), production growth in the eurozone was perfectly flat on a month-on-month basis for December 2023. Certainly after 2 months of contraction, but this masks significant heterogeneity. In December, France and Italy made strong contributions to the increase, both up 1%. However, Germany more than offset these two increases with a 1.1% decrease month-on-month. The weakness is particularly acute for intermediate goods compared to pre-covid levels."

Right now, the EUR/USD is trading at $1.0773.

KEY CHART ELEMENTS
An interesting technical fact, the 20-day moving average (in dark blue, bearish) is currently breaking its 50-day moving average (in orange, horizontal), a first contact since November 13th. The graphical and technical situation is tightening under this trend curve. However, the attack angle is not very significant. This trend curve, the first mentioned, which is accelerating downward, will opportunistically serve as a trailing stop.

MEDIUM-TERM FORECAST
In view of the key graphical factors we have mentioned, our opinion is negative in the medium term on the Euro Dollar pair (EURUSD).

Our entry point is at $1.0774. The price target of our bearish scenario is at $1.0436. To preserve the committed capital, we advise you to place a protective stop at $1.0881.

The profitability expectation of this forex strategy is 338 pips and the risk of loss is 107 pips.