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#1 11-06-2024 11:30:59

johnedward
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From: Paris - France
Registered: 21-12-2009
Posts: 3623
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EUR/USD: A short-term bearish bias

EUR/USD: A short-term bearish bias


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The euro remains under pressure against the dollar, in the wake of the European elections, and as the Fed's verdict approached.

As a reminder, these elections saw the far-right, sovereignist, populist and, for some, anti-EU parties make progress with the exception of Poland.

In the wake of the results in France in particular, the unpopular President Macron announced the dissolution of the National Assembly, inviting voters to renew the hemicycle at the end of June for the first round.

"However, the political center led by the conservative European People's Party (EPP) held firm and retained the majority in the European Parliament, ensuring that the immediate fallout for politics will be limited," says Claudia Panseri, CIO of UBS Wealth Management France.

Ms. Panseri, zooming in on the French case, thinks that a situation of cohabitation "makes it even more difficult to implement the fiscal measures necessary to regain control of the budget, which, from next year, will also have to respect new EU tax rules, which reinforces our view on the deterioration of the credit outlook for France and the preference for other European sovereign countries such as Slovenia, Austria and Spain."

The Fed will meet this week its Monetary Policy Committee (FOMC). If a status quo on rates is achieved, the meeting will be interesting, in particular because of the publication of the "dot plots", this famous dot graph, illustrating the median projection of the members of the central bank for the key rates for the months to come.

At the heart of last week, the ECB pulled the rug out from under the Fed's foot, by committing first to a cycle of rate cuts. This initial loosening of the tap could, however, be followed by a long pause.

Right now, the EUR/USD is trading at $1.0743.

KEY CHART ELEMENTS
The currency pair recorded a double top at $1.0885 which further asserts itself as a resistance level, below which the bearish bias can regain its rights. Especially in the event of rapid reintegration of the lower part to an oblique (drawn in black), a major graphic reference point. This test is underway, in conditions of challenging volatility. Negative review maintained.

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 $1.0754. The price target for our bearish scenario is at $1.0551. To preserve the invested capital, we advise you to position a protective stop at $1.0841.

The expected profitability of this forex strategy is 203 pips and the risk of loss is 87 pips.

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