EUR/USD: Central banks do not want to slow down too soon

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Euro and Dollar neutralized each other Thursday, in full turmoil on the side of the bond markets, the forex traders betting massively on a continuation of a restrictive monetary policy. Under these conditions, the contraction of risk appetite becomes the main matrix of the market.

Market which “suffers from a double negative effect. For several days, the economic indicators have not been good, in Europe and Asia, as we saw again on Wednesday with the PMI Services. And moreover, the equity indices are penalized by the voluntarist and restrictive speeches of intent of the central banks which we already know (for the Fed, the American Federal Reserve, and the European Central Bank, the ECB) that they will certainly raise their rates in July. then the doubt about a second consecutive increase, doubt which will last until September”, develops Alexandre Baradez, head of market research at IG France.

The Fed Minutes, the traditional chronological account of the debates that animated the last FOMC, only reinforced operators in this idea. As proof, according to the CME’s FedWatch tool, the odds of a 25 basis point hike after the June break now exceed 88%. “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”.

It is in this thorny context that forex traders will welcome the results of the NFP report (for No Farm Payrolls), federal monthly report on private employment in June. Any indication showing an additional heating of the employment market across the Atlantic, already under great tension in certain sectors, will have a mechanical effect on the expectations of the Fed Funds curve. Currency traders will have a taste this Thursday with the results of the private human resources firm ADP at 2:15 p.m. and the weekly registrations for unemployment benefits at 2:30 p.m.

At midday on the foreign exchange market, the Euro was trading against $1.0880 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