EUR/USD: ZEW and Sentix disappoint

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THE spreads Rates in the Euro Zone, compared to the German standard, are progressing, and since the start of the week have given the single currency an advantage, which is however stalling against a resistance zone at $1.10. The publication in the week of the consumer price indices in the United States could catalyze the situation, by coming together with the lessons of the latest employment report. Traders will try to refine their forecast of the Fed Funds return trajectory for the coming months.

As a reminder, published on Friday, the traditional NFP, still closely followed, highlighted job creations in the private sector (excluding agriculture) of around 210,000 units, below the target of 224,000, as well as a stabilization of the unemployment rate at 3.6% of the active population. So much for the “phew of relief”. On the other hand, it should be noted that the dynamics of wages (+0.4% on a monthly basis) exceeded expectations, and should mechanically fuel the debates towards maintaining monetary firmness at the next FOMC. Not enough, therefore, to influence the Fed in its decision to raise Fed Funds by 25 bps at the end of the month. A probable scenario up to 92.4% according to the CME Group’s FedWatch tool.

After the Sentix of investor confidence in the Euro Zone yesterday, the ZEW of confidence in the German economy, published this morning, is also unappealing. The index fell to -12.2, the lowest since December 2022. The first economy of the monetary union, formally in recession, is suffering the blow. The Sentix business cycle clock analysis tool is sitting strongly in recessionary territory, with the current conditions component suggesting weaker GDP growth than we and the consensus expect, analysts say. Nomura in a commentary note on the Sentix.

At midday on the foreign exchange market, the Euro was trading against around $1.0990.

KEY GRAPHIC ELEMENTS

The current working band lies between support at $1.0850 and resistance at $1.1000. A continuation of oscillations in this framework is the preferred option in the immediate future.

MEDIUM TERM FORECAST

In view of the key chart 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 1.0854 USD and the resistance at 1.1000 USD.

CHART IN DAILY DATA