EUR/USD: No change in direction with impending Trump inauguration

Although Wall Street will remain closed due to a public holiday today (commemoration of the birth of Martin Luther King), traders will nonetheless be deprived of reference points, with the language elements that the impetuous Donald Trump will use during his inauguration as the 47th President of the United States. The former tenant of the White House (2017 - 2021) will sign a multitude of presidential decrees in the process, on immigration, customs protections, drilling permits in particular, as well as possible pardons. Currency traders will have plenty to "quote" about...

Trump will have the opportunity to clarify his geopolitical positions, as the truce comes into force in Gaza. His imperialist positions on Canada, Greenland and Panama will naturally be clarified.

"Geopolitics will also make a big comeback this year thanks to a new Trump presidency," confirms Christopher Dembik, investment strategy advisor at Pictet AM.

"For the moment, its outbursts, particularly concerning the Panama Canal and Canada, have been viewed with disdain by many French commentators. In reality, all this is more subtle. The new American administration wants to create a strategic buffer by ensuring the United States' control over Canada and Greenland. In the case of Greenland, the objective is twofold: to control the new trade route that is opening up due to the melting of the ice, and to access metals that are essential to ensuring American economic development and its hegemony in AI. This implies having control of Greenland's uranium reserves."

Furthermore, the EUR/USD, while maintaining its underlying bearish bias, was beginning to balance out in the short term, against a backdrop of hope that the Fed would adopt a less rigid stance than the financial community had feared at the very beginning of the year. The reason: the statements made on Thursday by the governor of the American Federal Reserve (Fed), Christopher Waller. The central banker seemed in favor of rate cuts by the American institution as early as March, and indicated that three or four cuts were possible this year, if economic data permits, reports Deutsche Bank. This has somewhat reassured a market that feared that the Fed would pause rate cuts this year.

In the statistical chapter on Friday, the final consumer price data for December in the Eurozone were published, with no deviation from the initial estimates. Excluding volatile items (food, energy, alcohol and tobacco), prices rose by 2.6% on an annual basis, at the same rate as in November. Across the Atlantic, the report on the health of industry in December exceeded expectations, both for the volume of production (+1%) and for the production capacity utilization rate (77.5%).

In addition, China published its growth figures for the whole of 2024 as well as for the fourth quarter of last year. China's gross domestic product (GDP) increased by 5% in 2024, the government's target, and by 5.4% in the fourth quarter, and therefore more than the 5% anticipated by the consensus.

While the agenda is almost deserted today, it will start to thicken tomorrow with the German "ZEW", a valuable barometer of confidence in the leading German economy.

Right now, the EUR/USD is trading at $1.0387.

KEY CHART ELEMENTS
The 50-day moving average (in orange) continues to constitute a solid technical and graphic barrier. In the shorter term, its 20-day counterpart (in dark blue) is even acting as dynamic resistance. And this without the RSI oscillator positioning itself in the oversold zone.

Once perfect parity is reached, namely $1 = 1 euro, an energetic buying reaction of protest could take place.

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 $1.0318. 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 $1.0406.

The expected profitability of this forex strategy is 317 pips and the risk of loss is 88 pips.