EUR/USD: France pulls down the European service PMI

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Deprived of benchmarks from Wall Street on Tuesday, a public holiday and non-working across the Atlantic for Independence Day (4th of July), forex traders took only limited initiatives, in a starving level of activity on the pair of Euro/Dollar currencies, which continues to bring relief on the inflation front, particularly in the US, and the stronger than expected slowdown in the German economy. The ZEW index of confidence in the German economy, on July 11, will be very carefully scrutinized in this respect. Just like, this Friday, the federal monthly report (NFP) on private employment in the United States. The opportunity to gauge chronic tensions on employment and its inflationary effects on wages. This burning subject will naturally have been raised during the debates of the last FOMC, of ​​which the Minutes, namely the chronological report, will be published this Wednesday, 8:00 p.m., Paris time.

At the end of this month, a new meeting of the Monetary Policy Committee is scheduled. According to the CME’s FedWatch tool, the odds of a 25 basis point hike, after the June break, exceed 86%. “If the scenario of another Fed rate hike at the end of July still holds, […] with a voluntary Jerome Powell during his last declarations, [Thomas Giudici, chez Auris Gestion] consider[e] nevertheless that a new break is still likely”.

“In the euro zone, the decline in inflation figures should, however, be insufficient for the ECB. Indeed, if headline inflation over one year fell from 6.1% to 5.5% over the month, prices in services rose to new and “core” inflation is thus up slightly over the month (5.4% against 5.3% in May)”, continues the head of bond management at Auris Gestion.

Traders took note this morning of the PMI activity indicators in services in Europe, in final data for the month of June. The disappointment is with go, with a score of 52 points for the whole of the Euro Zone. This is a 5 month low.

The Euro Zone economy is at a standstill at the end of the second quarter. Although growth continued in the services sector, it slowed to its weakest pace in five months. It was also offset by a sharp decline in production in the manufacturing sector, which accelerated compared to May.

Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, shed the following light: “The French services sector was the weakest performer in June, with France also being the only country covered. by the survey to have reported a drop in activity in services compared to the previous month. This deterioration in the economic situation in France can be explained, in addition to more general factors such as the tightening of financial conditions and the weakening demand, by the strikes and demonstrations organized in recent months against the pension reform project.

As a reminder on Monday, the final industrial PMI data also gave no satisfaction. It was the German component in particular that made the markets wince, coming out below the first estimates, at 40.6, the lowest since June 2020.

At midday on the foreign exchange market, the Euro was trading against $1.0890 approximately.

KEY GRAPHIC ELEMENTS

The Euro/Dollar currency pair now sees its 20-day moving average (in dark blue) cut upwards against its 50-day counterpart (in orange), which requires us, according to the established trading plan, to cut our positions short, waiting for suitable signals. The form of congestion observed since June 16 lacks frankness, and remains poor in lessons.

MEDIUM TERM FORECAST

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

We will maintain this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 1.0784 USD and the resistance at 1.1000 USD.

CHART IN DAILY DATA