EUR/USD: The pair consolidates its good progress

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With the approach of important monetary maturities, the Euro/Dollar continued its phase of consolidation with its very recent advance. High gain mainly built last week with the confirmation by the consumer and producer price indices of a marked slowdown in US inflation. The major central banks are facing the same challenge, with a different time frame and different stakes, namely that of bringing prices down to a much lower “temperature”, while avoiding too sudden a brake on the economy, through action on key rates.

“While progress in tackling inflation looks ‘promising’, it would appear that politicians are still awaiting ‘positive’ inflation data and other signs that labor market imbalances are easing.” advances Christian Scherrmann, Economist US DWS on the Fed. It is true that the latest federal report on employment, like the weekly registrations for unemployment benefits, betray chronic tensions in certain sectors.

“Only then would the Fed seem inclined to shift to a ‘wait and see, data driven, higher for longer’ mode. Therefore, [les stratégistes de DWS] born [s’] waits[ent] Nor are we expecting Fed officials to back down from their hawkish stance at the next meeting.

On the ECB side, remember that Klaas Knot, president of the Bank of the Netherlands and member of the ECB’s governing council, not known to be the most dovish of the team, said on Tuesday that rate hikes after July were not “a certainty” but “at most a possibility”. These comments give investors hope that the ECB’s monetary tightening policy is coming to an end. What feed a little more the optimism of investors on the orientation of the monetary policy of the European institution.

“Ultimately”, for Ulrike Kastens, Economist Europe, “it is the interest rate outlook that is decisive and will be the main subject of the press conference. However, ECB President Christine Lagarde is unlikely to give a clear answer on this subject. The underlying price trend remains worrying. On the other hand, it is likely that the new growth and inflation forecasts expected in September will not make it possible to determine whether a further rate hike is necessary.”

In any case, increases of 25 basis points at the next monetary policy meetings are almost guaranteed. The ECB completes its next Board of Governors on July 27 and the Fed its FOMC the day before, on the 26th.

At midday on the foreign exchange market, the Euro was trading against $1.1125 approximately.

KEY GRAPHIC ELEMENTS

The flagship currency pair is in a consolidation phase above a 20-day moving average (in dark blue) whose support role will soon be tested. The underlying trend remains bullish, without a comfortable entry point emerging.

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 keep this neutral opinion as long as the Euro Dollar (EURUSD) parity prices are positioned between the support at 1.1100 USD and the resistance at 1.1300 USD.

CHART IN DAILY DATA