EUR/USD: How will the remuneration gap evolve between the 2 currencies?

Bearish bias confirmed for the EUR/USD, which continues to suffer from a low potential future return, of the first currency against the second, at a time when the American economy is showing insolent resilience, and when the European economy is losing momentum with its questionable French and German leaders.

"Public deficits and debt are another increasingly threatening pitfall that require more effective actions from States. In France, we see the difficulty of reducing wasteful public spending and the natural propensity to prefer ridiculous tax increases that are not conducive to growth. If we add lower-than-expected inflation and now the Central Bank's objective, everything now argues for more vigorous action by the latter. Internal debates within the monetary institution are giving rise to increasingly audible voices in favour of accelerating the rate cut process. The monetary easing cycle that began in July will therefore, in our opinion, continue and even increase," comments Emmanuel Auboyneau, managing partner at Amplegest.

In the US, "the monetary easing cycle has begun but it should be slow and steady. An election of Donald Trump could also marginally slow down these rate cuts due to a slightly more inflationary policy, particularly in trade," continued the asset management executive.

In Germany, it is particularly the German industrial model, THE traditional strong point, which is showing its limits after several years of inflation.

The markets remain focused on the major event that structures political life in the US: the elections of the (or the!) President, in 8 days. The latest polls show an extremely close duel between former President Trump and Biden's current Vice President, K Harris.

"In this highly anticipated presidential election, Donald Trump is promising tax cuts for businesses and individuals, but intends to impose tariffs on foreign companies, in addition to mass deportations of immigrants and a government overhaul," Robeco strategists note.

Kamala Harris is targeting the middle class and investing in housing and healthcare development while raising taxes on corporations and the very wealthy. Both candidates' agendas are likely to widen the already growing budget deficit.

That said, fiscal responsibility is far from the top of the list for voters, as the economy tends to be the dominant issue on the ballot, says Mike Mullaney, director of global markets research at Boston Partners, Robeco's sister entity focused on fundamental value investing.

On the macroeconomic agenda on Monday, there were no major figures to report. It will expand tomorrow with the American consumer confidence index (Conference Board).

Right now, the EUR/USD is trading at $1.0817.

KEY CHART ELEMENTS
The oblique support line (drawn in black) has given way in a significant and increasing level of volatility. The 50-day moving average (in orange) has also given way quickly, the bearish message is reinforced. The next graphical event to watch is the current crossing of two remarkable moving averages, at 20 and 50 days. The crossing angle is significant, in light of the current correction.

MEDIUM-TERM FORECAST
In view of 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 $1.0813. The price target of our bearish scenario is at $1.0551. To preserve the invested capital, we advise you to position a protective stop at $1.0907.

The expected profitability of this strategy is 262 pips and the risk of loss is 94 pips.