EUR/USD: A pullback at $1.0550

The EUR/USD pair may have developed a pullback towards $1.0550, but the bias remained clearly bearish, against a backdrop of increasing economic imbalance between the two sides of the Atlantic.

"The eurozone is more than ever penalised by its two "locomotives" stuck in political blockages. While we are still wondering how France will manage to bring its sordid public finances back on track (without, hopefully, impacting growth too much), Germany, for its part, must completely review its economic model in place since the 1990s and reunification: exports to China, cheap Russian oil and gas, and American protectionism. Of the three, none remain," notes Thomas Giuduci, head of bond management at Auris Gestion, coldly.

While on the contrary, "everything seems to be going well in the US: producer prices are slowing, tensions on the labour market are decreasing and, above all, business leaders' forecasts are reaching two-and-a-half-year highs, thanks in particular to the pro-business policy desired by the new American administration."

The macroeconomic calendar is filling out somewhat with, at 16:00 (EU time), the closely followed US consumer confidence index (Conference Board) and at 20:00, the Fed Minutes, a valuable meeting for currency traders, who look for clues on the intentions of the powerful national bank in terms of monetary policy. Yesterday, the morale of German entrepreneurs fell more than expected in November, to 85.6 points, according to the IFO barometer published this Monday. The market consensus anticipated a less pronounced deterioration, to 86 points compared to 86.5 points in October.

"The strong dollar should remain the norm in 2025," predicts Christopher Dembik, Investment Strategy Advisor at Pictet AM. "International investors are now only betting on the US economy. As a result, inflows into the US market are reaching record levels, which is structurally supporting the rise in US stocks and the greenback. For example, over the week of November 5 to 13, US ETFs and mutual funds attracted $55 billion. This is the second largest weekly inflow since 2008. It's just incredible."

Right now, the EUR/USD is trading at $1.0510.

KEY CHART ELEMENTS
The currency pair has just broken out of a wedge pattern in intense volatility, confirming the bearish bias that is now in place. Since then, the fragile supports have been breaking one after the other. Negative opinion maintained. Nevertheless, at this stage, the decline, the formation of a technical rebound cannot be long in coming, we are watching for signs.

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 $1.0509. The price target of our bearish scenario is at $1.0101. To preserve the capital invested, we advise you to position a protective stop at $1.0636.

The expected profitability of this Forex strategy is 408 pips and the risk of loss is 127 pips.