EUR/USD: prices reflect a lack of appetite for risk

The euro remained under pressure against the Dollar in a foreign exchange market which reflected a glaring lack of risk appetite.

Yesterday, the upward revision of the American quarterly GDP (+1.3%), as well as the weekly registrations for unemployment benefits, still low (233K), constituted all leading indicators of inflation.

The market also digested this week the restrictive comments of the governor of the Federal Reserve (Fed), Michelle Bowman, who declared Tuesday that "we have not yet reached the point where it is appropriate to lower key rates", according to Deutsche Bank.

According to the CME Group's FedWatch tool, a scenario of federal rate cuts in September has almost a 61% chance of happening (compared to 67% at the start of the week). The tool, as a reminder, makes it possible to quantify and analyze the probabilities of changes in federal rates and American monetary policy based on the price of 30-day federal funds futures contracts. This is a valuable and complementary tool to the dot plot diagram.

Right now, the EUR/USD is trading at $1.0701.

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 in progress, in conditions of volatility which challenge. Negative opinion maintained, especially as the pattern (graphic model) developed increasingly resembles a bearish triangle.

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 $1.0696. 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 strategy is 260 pips and the risk of loss is 105 pips.