EUR/USD: Central bank meetings + Chinese banking sector

While the week will be punctuated on the monetary front by meetings of major central banks, including the Bank of Japan, the Bank of England and the Fed, the EUR/USD continued its downward movement, against a backdrop of great caution regarding so-called risky assets. If this Monday is deserted on the macroeconomic front, it will be nothing for the rest of the week. Starting tomorrow, growth figures will be published in Europe, as well as the closely followed consumer confidence index (Conference Board in the United States). On Wednesday, it will be the turn of the survey by the private human resources firm ADP to set the tone on the health of American private employment, before the publication of the monthly NFP (Non Farm Payrolls) report on Friday. In the meantime, on Thursday, traders will focus on weekly unemployment benefit registrations and the ISM PMI manufacturing index.

The opportunity to more precisely measure the "normalisation" of the world's major economies, and the capacity, especially in the United States, to see economic activity land gently. One scenario is currently holding the rope: that of two federal rate cuts this year, with one almost certainly at the start of the school year.

The appetite for risk, which influences the Euro against the safe haven Dollar, may be affected by the Chinese banking sector. As compiled by Christopher Dembik, investment strategy advisor at Pictet AM, "The situation in China is causing cold sweats for investors around the world. This time, it is the banking sector that is the main point of attention. In one week, 40 banks have disappeared. The country is facing a silent banking crisis. Nearly 3,800 small local banks - mainly located in rural areas - are in difficulty. This is the equivalent of 13% of the Chinese banking system."

Right now, the EUR/USD is trading at $1.0813.

KEY CHART ELEMENTS
After failing against a graphical resistance level around $1.0910, the EUR/USD has fallen back, now being on a congestion zone of two remarkable moving averages, at 20 and 50 days.

MEDIUM-TERM FORECAST
In view of the key graphical factors that we have mentioned, our opinion is negative in the medium term on the pair's parity.

Our entry point is at $1.0838. The price target of our bearish scenario is at $1.0601. To preserve the capital invested, we advise you to position a protective stop at $1.0907.

The expected return on this forex strategy is 237 pips and the risk of loss is 69 pips.