EUR/USD: Powell is allowing himself some time

The publication yesterday of inflation figures that were firmer than expected in the sense of consumer prices will have caused a heating up of American bond yields, without however an effect on the dollar. On the contrary, since the euro recovered a few "pips", against a backdrop of hope for peace in Ukraine.

The publication of consumer prices in the United States yesterday opportunely fell at the heart of the biannual hearing of the Fed boss before parliamentarians (of the Senate on Tuesday and of the House of Representatives on Wednesday). Concerning these CPIs (Consumer Price Index), they came out up 2.9% in the broadest basket of products on an annual basis in January, against a target of 2.8%. Enough to cause an additional heating up of yields, in particular the 10-year American which serves as a barometer. The 10-year Treasuries soared towards 4.55% in the wake of this statistic which puts a little more pressure on the monetary institution, forced to stabilise its rates.

"This is the 9th time in the last 10 years that inflation has come out above expectations in January. This time, the rise in core inflation is almost entirely explained by the 'transport' component. One more argument for the Fed to take its time," says Bastien Drut, head of strategy and economic studies at CPRAM.

After the statistic, the markets are now only predicting a reduction of a quarter of a point (0.25 percentage points) for the rest of 2025, according to Bloomberg.

At 14:30 (EU time), traders will be able to follow producer prices and weekly unemployment benefit registrations in the US, two indicators directly correlated with inflation.

The general psychology does not change, however, with the single currency remaining in great difficulty against the greenback since the double summit in September, while J Powell's biannual hearing before parliamentary committees is coming to an end. The Fed boss sent a clear message on this occasion: he is giving himself time before considering loosening the monetary tap.

Right now, the EUR/USD is trading at $1.0419.

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 acting as dynamic resistance. And this without the RSI oscillator positioning itself in the oversold zone. For the time being, the currency pair is tracing a negative harami structure in the upper part of the Bollinger bands. Once perfect parity is reached, namely $1 for 1 euro, an energetic buying reaction of protest could then 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 $1.0425. 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 $1.0609.

The expected profitability of this forex strategy is 424 pips and the risk of loss is 184 pips.