EUR/USD: A clear, decipherable technical picture

This week, the EUR/USD is completing its consolidation wedge right at the 20-day moving average (in dark blue), just as the White House has formalised the end of the crucial ceasefire with Tehran - triggering a surge in crude oil prices and a renewed rise in bond yields on Wednesday. These movements largely subsided during the latter part of the week.

"Iran doesn't control the Strait of Hormuz," asserts US Central Command. As announced by Trump a few hours earlier, the US military carried out a series of strikes against Iranian military facilities overnight from 8 to 9 July. In retaliation, the Revolutionary Guards announced attacks on US bases in Kuwait and Bahrain.

On the data front, there was little of note yesterday. However, weekly US jobless claims came in at 214,000 - exactly in line with the consensus forecast.

It is worth noting that, according to INSEE (the national statistics institute), final data shows French consumer prices contracted by 0.3% in June, rather than the previously reported 0.2%.

Next week, currency traders will be watching the semi-annual hearing of K. Warsh - the new Fed chief - before the Senate, seeking to better gauge the likelihood of a 25-basis-point federal rate hike at the end of July. Currently, the probability stands at 22% according to CME Group's FedWatch tool. This figure had hovered near 35% prior to the release of the US non-farm payrolls (NFP) report on 2 July, which showed private-sector non-farm job creation at half the level expected by the consensus. At midday on the foreign exchange market, the Euro was trading at approximately $1.1430.

KEY TECHNICAL FACTORS
The pullback (technical rejection) identified in our previous analyses - occurring at a zone where resistance levels converged (a horizontal level at $1.1610 and the 20-day moving average) - was followed by a surge in selling pressure. The target of $1.1203 remains in place. The spot rate is currently breaking below annual lows ($1.1408).

A break below $1.1202, accompanied by significant volatility, would lock in a lower bearish target of $1.1012, prior to a sharp, corrective bullish rebound.

MEDIUM-TERM OUTLOOK
Based on the key technical factors mentioned, our medium-term outlook for the EUR/USD pair is bearish.

Our entry point is $1.1432. The price target for our bearish scenario is $1.1013. To protect invested capital, we recommend placing a stop-loss order at $1.1551.

The expected return for this  strategy is 419 pips, with a risk of loss of 119 pips.