EUR/USD: US CPI expected at 3.1% annualized, volatile elements included

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At the game of spreads rates, so compared to the standard that constitute the German rates, the Euro retains the advantage, especially after a ZEW indicator of confidence in the economy which continued to decline, more profoundly than envisaged by the community financial.

After the Sentix of investor confidence in the Euro Zone on Monday, the ZEW of confidence in the German economy, published on Tuesday 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 strongly in recessionary territory, with the current conditions component suggesting weaker GDP growth than we and the consensus expect, analysts insist. Nomura in a commentary note on the Sentix.

On the American side, the major meeting of the day is naturally the publication of consumer prices (CPI), one of the reference markers of inflation. The opportunity for the Fed (and forex traders) to measure how quickly the economic machine is cooling down, otherwise how effectively the restrictive monetary policy measures undertaken are bearing fruit. The federal report on private employment in June, published on Friday, showed a very slight decrease in tensions.

“The market appears to be embracing policy rates ‘higher for longer’, postponing rate cuts in line with messages from Federal Reserve (Fed) Chairman Jerome Powell and European Central Bank (ECB) President Christine Lagarde ). Short rates reacted first, with long rates beginning to catch up in the first week of July,” note strategists at Muzinich & Co.

At midday on the foreign exchange market, the Euro was trading against $1,1020 approximately.

KEY GRAPHIC ELEMENTS

The spot has just exceeded, without a franchise for all that, a level at 1.1000, which until then was the upper limit of a lateral drift channel. The US Inflation numbers (at 2:30 p.m.) will be key in qualifying this chart level as support or resistance, if any.

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 keep this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 1.1000 USD and the resistance at 1.1100 USD.

CHART IN DAILY DATA