EUR/USD: A key moving average line broken through

Since the break of an oblique line (in black on the chart), the EUR/USD remained under pressure, in a geopolitical atmosphere that is not very conducive to risk assets, with the notable exception of crude oil. On Thursday, US President Joe Biden indicated that Israel could attack Iran's oil infrastructure. This significantly boosted oil prices. "Without a doubt, this rise in the price of oil and the growing tensions in the Middle East have affected risk-taking on the markets. Nevertheless, the market remains focused on the evolution of growth and inflation in the major countries, particularly because of their impact on monetary policies," explains Sebastian Paris Horvitz, of La Banque Postale AM.

While traders are approaching a rather poor week in terms of statistics, they continue to digest the US employment report published on Friday. A very, very solid report, which beat all consensus, particularly on the volume of jobs created in the private sector. First of all, the unemployment rate, expected to be stable at 4.1% of the working population, is down to 4%. Job creations in the private sector (excluding agriculture) exploded to 253,000, against a consensus of 148,000 (!). Finally, average hourly wages increased by 0.5%, extending the August trend (+0.6%). Figures that show a very strong resilience of private employment, and that could theoretically push back expectations of rate cuts.

"US employment was much stronger than expected in September, which implies that the Fed will most certainly reduce the size of its rate cuts from 50 basis points (0.5 percentage points) in September to 25 basis points at its next meetings, as we anticipated," writes Xavier Chapard of LBPAM.

This Monday, the Sentix Eurozone investor confidence index, although still clearly in negative territory, rose to -13.8, moderately beating expectations.

Right now, the EUR/USD is trading at $1.0970.

KEY GRAPHIC ELEMENTS
The oblique support line (drawn in black) has just given way, in a significant and increasing level of volatility. If the 50-day moving average (in orange) were to give way quickly as well, the bearish message would be reinforced. This test is fully validated, in light of the size of the red body of the candle on Friday, October 4.

MEDIUM-TERM FORECAST
In view of the key graphic factors that we have mentioned, our opinion is negative in the medium term on the EUR/USD.

Our entry point is at $1.0980. The price target of our bearish scenario is $1.0665. To preserve the invested capital, we advise you to position a protective stop at $1.1071.

The expected profitability of this strategy is 315 pips and the risk of loss is 91 pips.