EUR / USD: After the verdicts of the central banks, an unchanged behavioral framework

(News Bulletin 247) – Yesterday, after the Fed on Wednesday, it was the turn of the ECB, after the Fed on Wednesday, to go on the grill, completing a Board of Governors. The monetary institution headed by Christine Lagarde indicated that it was keeping its key rates unchanged while announcing a gradual reduction in the pace of asset repurchases: net purchases of debt as part of its emergency purchase program against the pandemic (PEPP), with 1.850 billion euros, will be further reduced in the first quarter of 2022 and will expire as planned at the end of March.

John Plassard (Mirabaud) felt “a” slight improvement “in terms of” hawkishness “with a reduction (however expected) of the PEPP. However if the European Central Bank continues to count on transitory inflation (mainly driven by energy) , the question arises as to whether it is not too “timid” in terms of inflation forecasts, still counting on weak progress (below its objective) over the next 3 years.

We can therefore compare the two attitudes (strategy and language) of the two large central banks on either side of the Atlantic. No major surprise therefore, but confirmation that the “turn” taken by the Fed is tighter than that negotiated by the ECB.

As a reminder, the Fed paved the way for monetary normalization, by laying out the path a little more clearly. It plans to stop the bond buyback program in March, and a three-quarter point increase in its rates, in three times, over the coming year. And this with the aim of fighting against inflation that is no longer temporary. Associated with the new economic projections, this strategic commitment of the Fed was not considered more “hawkish” than expected. It must be said that this turn (not too tight) was anticipated.

Finally, “a decision quite in line with expectations” for Ronan Blanc, Managing Analyst at Financière Arbevel. “The Fed is trying to become an actor in its monetary policy again with some success (admittedly half-forgiven fault?). And fortunately for it, the cyclical peak of inflation seems close. The longer-term question is to know at what level she could land past that peak. That’s probably where she’ll be expected. So far she’s saving time and doing it pretty well. ” A “courageous” decision, for John Plassard, (Mirabaud), for whom the Fed “is finally tackling the rise in inflation before it gets potentially out of control. Investors have welcomed this decision, betting that the Fed will not will not find itself “behind the curve” by adopting a much more hawkish (hawkish) tone and by planning 3 rate hikes in 2022.

In the statistical chapter Thursday, the Empire State manufacturing index, like the weekly registrations for unemployment benefits, missed expectations. SAR on the federal industrial report broadly in line with expectations, both on the volume of production and on that of the rate of use of productive capacities.

In the immediate future, currency traders learned this morning of the IFO business climate index in Germany and consumer prices in the Eurozone, in final data for November. If no deviation from the consensus is to be reported for the latter, the IFO was somewhat disappointed, at 94.7. The business climate index in the Eurozone’s largest economy fell from 97.7 points in October to 96.5 points in November. “Companies were less satisfied with their current situation and expectations have become more pessimistic. Supply bottlenecks and the fourth wave of the coronavirus challenge German companies,” the publication read. ‘IFO this morning.

Nothing substantial to eat on the American side this Friday.

At midday on the forex market, the Euro was trading against 1,1330$ about.

KEY GRAPHIC ELEMENTS

For now, the Euro / Dollar currency pair is still in the course of a wedge consolidation wedge, which fits into a strongly bearish background momentum. The configuration remains heavy, but we warn against the temptation of an early return to bearish positions, the “risk” of a false top exit, in the very short term, being present. We are still waiting for a much better entry point.

MEDIUM-TERM FORECAST

In view of the key graphical factors that we have mentioned, our opinion is neutral in the medium term on the pair Euro Dollar (EURUSD).

We will keep this neutral opinion as long as the price of the pair Euro Dollar (EURUSD) is positioned between the support at 1.1150 USD and the resistance at 1.1360 USD.

DAILY DATA CHART

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