EUR/USD: the euro retains its advantage

A sense of optimism about the outcome of the Trump-led trade war against the rest of the world continues to carry the "at risk" currency that constitutes the Euro, while the Dollar loses points as the prospect of a federal rate cut looms.

The market appreciates certain advances on the duties file. Beijing and Washington announced they had agreed on the details of a deal struck in London, mid-June, which should reduce customs surcharges mutually imposed by the two countries. Treasury Secretary Scott Bessent also indicated that the US hoped to conclude trade negotiations with more than a dozen countries here by early September, according to the Wall Street Journal. Which implies the administration will not meet the July 9 deadline it initially set to impose higher customs duties on imports from dozens of countries.

On the statistical chapter, PCE prices, the Fed's preferred measure in its price appreciation, clearly constituted the point of the statistical organ on Friday. They have just been published, up 0.2%, twice as much as the consensus predicted.

"The PCE (Personal Consumption Expenditure) inflation measures are most closely watched by members of the FED, they are the ones used in the institution's quarterly projections and serve, among other indicators, to adjust the level of the rate fork," says Alex Baradez, analyst IG France before the publication of these key figures for the market. On a year-over-year basis, prices advanced 2.2%, in line with market expectations.

According to the CME Group's FedWatch tool, the odds of a Fed Funds decline by the end of next month now exceed 25%.

Today: the Chicago PMI index at 15:45 (EU time) and a speech by C Lagarde, President of the ECB, at the Sintra forum in Portugal.

Exchangers remain cautious ahead of the release of several key indicators this week, notably the employment report, due out on Thursday. Advanced activity indicators (ISM, PMI) will also be published this week.

Right now, the EUR/USD is trading at $1.1715.

KEY CHART ELEMENTS
The technical straightjacket release is confirmed, giving meaningful advantage to support over the 20-day moving average (in dark blue).

The buying position on the spot could be maintained as long as oscillations build between this trend curve and the upper end of the Bollinger bands (20;2,5).

MEDIUM TERM FORECAST
In view of the aforementioned key chart factors, our outlook is positive medium term on the EUR/USD.

Our entry point is at $1.1729. The course target of our bullish scenario stands at $1.2213. To preserve the capital committed, we recommend positioning a protective stop at $1.1539.

The expected profitability of this forex strategy is 484 pips and the risk of loss is set at 190 pips.