EUR/USD: slight advantage for the USD

The euro had a hard time finding support on the lower limit of the Bollinger bands at the end of the week, the appetite for risk remaining thwarted by the geopolitical situation in the Middle East. Latest episode to date, Israel's possible response, with a drone attack in central Iran in the immediate vicinity of a military base. The Israeli military has made no comments at this stage. The fear of a widespread conflagration in the region has weighed on the main stock markets for several weeks without yet generating any feeling of fear.

The hopes, now completely evaporated, of seeing federal rates decline rapidly also provide support for the Dollar, which could ultimately benefit from a yield gap to its advantage compared to the euro.

Pictet WM strategists are now counting on two 25bp rate cuts this year, in July and December. Compared to previous forecasts, the scale of anticipated easing has decreased and the timing of rate cuts was rejected."

Expectations reinforced yesterday by macroeconomic publications. Weekly registrations for unemployment benefits, at 211,000, and the Philadelphia Fed's manufacturing index, which explodes to 15.6, will invite the Fed to take its time. Remember that retail sales, published at the start of the week well above expectations, helped to show that the return to a target inflation of 2% would not be easy.

Right now, the EUR/USD is trading at $1.0654.

KEY CHART ELEMENTS
The very clear pullback on Thursday 18/04 on a resistance zone ($1.0693) will invite people to take short positions again on the EUR/USD, especially as the break of the 50-day moving average (in orange ) by its counterpart at 20 days (in dark blue) was done at a relatively large angle.

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 $1.0661. The price target for our bearish scenario is at $1.0435. To preserve the invested capital, we advise you to position a protective stop at $1.0756.

The expected profitability of this forex strategy is 226 pips and the risk of loss is 95 pips.