EUR/USD: An encouraging ZEW, before the American CPIs at 2:30 p.m.

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The Euro gained a few pips against the Dollar on Tuesday, following the publication of a surprise increase in the ZEW confidence index in the German economy. Not only did the indicator exit negative territory, but it greatly exceeded expectations, coming out at 9.8 points, the highest since March.

“Economic expectations for Germany have increased further. At the same time, the assessment of the current situation remains unchanged, at a low level. These observations support the impression that Germany’s economic development has reached its lowest point”, comments ZEW President Professor Achim Wambach on the survey results. “The unchanged assessment of the current situation is particularly remarkable given the deterioration in the assessment of the overall economic situation in the euro area. The increased economic expectations are accompanied by significantly more optimistic prospects for the German industrial sector and the domestic and foreign stock markets. Inflation and short- and long-term interest rates also appear to have reached a turning point in expectations.”

Across the Atlantic, the CPI (consumer price index) will be published this Tuesday, at 2:30 p.m. (Paris time), one hour before the opening of the debates on Wall Street. The opportunity to further refine the effectiveness, at this stage, of many months of restrictive monetary policy. And to refine a little more if necessary the probability of having already reached, or not, a peak on the Fed Funds. On an annual basis, prices are expected, in the broadest base of products, to increase by 3.3%, compared to 3.7% the previous month. A real slowdown in price dynamics, therefore, constitutes the consensus for this major publication.

“It is still too early to say, and inflation may reveal surprises, but the succession of recent monetary policy decisions suggests the end of the cycle of monetary tightening initiated more than a year ago”, for Benoit Peloille, Chief Investment Officer of Natixis Wealth Management. “In any case, this is the message sent by the recent rebound in bond markets.”

At midday on the foreign exchange market, the Euro was trading against $1.0720 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 1.0693 USD and resistance at 1.0792 USD.

DAILY DATA CHART