EUR/USD: Will Trump's customs taxes be less harsh?

Very strong rebound of protest on the EUR/USD today, in the wake of press information suggesting that the customs tariffs imposed by D Trump, could be less severe than initially planned.

As a reminder, the US president-elect plans to introduce customs surcharges of 60% on Chinese imports as well as "universal duties" of 10-20% on those of other countries. The Post indicates today that these "universal" customs duties could be restricted to certain sectors and would thus only cover "critical imports".

The American media, which relies on three anonymous sources, writes that the exact list of industries that would be concerned is not clearly established at present. But it could include the supply chain of defense activities, medical equipment or even energy-related components.

Enough to make the single currency jump by more than 1% against the Dollar, two weeks before the inauguration of the 47th President of the United States.

In terms of statistics on Monday, no deviation from the target is to be reported, whether for the final data of the PMI services in the Eurozone (51.7) or the Sentix investor confidence index (-17.6).

In terms of statistics on Friday, currency traders reacted to better-than-expected manufacturing activity in December. The ISM manufacturing index (often considered more relevant than the PMI index) came out at 49.4 in December against 48.3 consensus and after 48.4 in November. However, American manufacturing activity continues to deteriorate since the threshold of 50 marks the border between contraction and expansion of activity.

Right now, the EUR/USD is trading at $1.0385.

KEY CHART ELEMENTS
The surge experienced by the EUR/USD today is not likely to thwart the underlying bearish bias, but sends a legitimate message of protest. The 50-day moving average (in orange) continues to constitute a solid technical and graphic barrier.

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 $1.0422. The price target of our bearish scenario is at $1.0001. To preserve the capital invested, we advise you to position a protective stop at $1.0556.

The expected profitability of this forex strategy is 421 pips and the risk of loss is 134 pips.