EUR/USD: A little less dove, a little more hawk

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The Euro/Dollar continued its consolidation movement near $1.0690 in a foreign exchange market which was able to confirm yesterday, through the voice of the head of the Fed, that victory against inflation was still far from being achieved. be won. Basically, the community of currency traders knew this, but the confirmation of the main financier of the planet has the merit of clarifying things on one point. The question of the “peak” of rates has not yet been definitively resolved.

During a round table entitled “Monetary challenges in a global economy” at the annual Jacques Polak research conference in Washington DC, Jerome Powell took part in the question and answer game and was unable to avoid the question of so-called “terminal” rates, namely whether or not a peak has already been reached on the Fed Funds. Mr Powell clarified that the members of the Institution were not convinced that the Fed Funds were high enough to fight inflation. It will therefore take more than a reassuring NFP report on employment and a PMI indicator in slowing services for the Fed to let its guard down.

Several Fed officials and in particular supporters of a strict monetary policy had already come to instill doubt. Minneapolis Fed President Neel Kashkari said it was premature to declare victory too quickly in the Fed’s battle against inflation. He was followed by another Fed official, Michelle Bowman, who judged that a further rate hike could be necessary to control inflation, if it did not slow down in the coming months.

Enough to cause a new surge on the American 10-year bond, close to 4.62%. He still remains a good distance from the 5, who came close last month. The probabilities of an increase in Fed Funds of 25 bps from the next FOMC, however, remain very limited, around 10%, as defined by the CME Group’s FedWatch tool.

“Central banks [devraient être forcées de] maintain high rates for longer than what the market estimates today and as long as the job market does not “break”, which does not seem to be for any time soon”, estimates François Rimeu, Senior Strategist at La Française AM. “And at the risk of repeating ourselves, the budgetary dynamics of states will have a significant impact on the resistance of the economy and the job market to rate increases.”

In the statistical chapter on Thursday, weekly registrations for unemployment benefits were scrutinized. They came out perfectly in line with expectations, with a low level of 217,000 new units. On the agenda this Friday, priority will be given to a speech by Ms. Lagarde, President of the ECB at 1:30 p.m. and the American consumer confidence index (U-Mich, preliminary data) at 4:00 p.m.

At midday on the foreign exchange market, the Euro was trading against $1.0690 approximately.

KEY GRAPHIC ELEMENTS

The 20-day moving average (in dark blue) is in phase, at a significant angle, to reconquer the 50-day long moving average (in orange), even though these two trend lines have not met since the August 17. The bearish message is therefore no longer so clear. The neutral opinion will be kept immediately.

MEDIUM TERM FORECAST

Considering the key graphical 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 Euro Dollar (EURUSD) prices are positioned between support at 1.0550 USD and resistance at 1.0792 USD.

DAILY DATA CHART