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#1 23-01-2025 11:40:18

johnedward
Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 3712
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EUR/USD: A test of the 50-day moving average

EUR/USD: A test of the 50-day moving average


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The forces were balancing out in the very short term, close to the 50-day moving average (in orange), a heavily bearish trend line, on the flagship currency pair. Currency traders continued to dissect the latest shock announcements from the new tenant of the White House, while already looking ahead to the next Governing Council of the European Central Bank, which will end on 30 January, in exactly one week.

Trump threatens to target the EU and introduce 10% customs duties on imports from China, "probably" from 1 February. This is still quite far from the 60% previously mentioned during the presidential campaign. Hence the continued rise in luxury stocks, such as LVMH (+1.79%), Hermes (+2.14%) and L'Oreal (+2.49%).

Donald Trump also announced the "Stargate" project, a joint venture between Softbank, OpenAI and Oracle. This new company plans to develop the infrastructure needed for the rise of artificial intelligence, including data centers. It plans initial investments of $100 billion, which should then increase to $500 billion.

On the European monetary policy side, the "[economic] context allows the ECB to further reduce the deposit rate by 25 basis points, to 2.75%", according to Ulrike Kastens, European Economist, who bases her opinion on the dichotomy with the health of the American economy.

"Since the last ECB meeting in December, the data picture in the euro area has not changed much. Economic indicators continue to point to rather weak growth in the coming months. As expected, the inflation rate continued to increase at the end of 2024. However, inflation projections also show increased confidence that the increase in the cost of living will move sustainably closer to the inflation target."

On the macroeconomic agenda today, at 14:30 (EU time), we have the weekly unemployment benefit registrations in the United States.

Right now, the EUR/USD is trading at $1.0412.

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

Once perfect parity is reached, an energetic buying reaction of contestation 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 $1.0412. 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 $1.0531.

The expected profitability of this forex strategy is 411 pips and the risk of loss is 119 pips.

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