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The Euro/Dollar is quietly embarking on the path of a consolidation phase – a flag or pennant figure is currently favored – in the wake of the very sharp increase on Tuesday, November 14, caused by a confirmation of a slowdown in American inflation. A consecutive easing in sovereign bond markets this week will have given some breathing space to risky asset classes.
On the agenda this Thursday, investors will be attentive to a speech by the President of the European Central Bank (ECB), Christine Lagarde, at 12:30 p.m. This speech will open the annual conference of the European Systemic Risks Board. On the other side of the Atlantic, several officials from the Federal Reserve will also speak, including the Governor of the San Francisco Fed, Lisa Cook.
In the macroeconomic chapter, operators will learn this afternoon of the manufacturing activity index for the Philadelphia region for November as well as the essential weekly registrations for unemployment benefits at 2:30 p.m. These statistics will be followed by industrial production for the month of October at 3:15 p.m. (volume and production capacity utilization rate).
As a reminder, the monthly consumer price indices (CPI), regardless of the product base chosen, all came out below expectations. Compared to October 2022 in particular, all products combined, inflation now stands at +3.2% compared to +3.7% the previous month, below the target at +3.3%, according to the latest data published by the Department of Labor.
Better yet, so-called “core” inflation, that is to say excluding the price of food and energy, stood at 4.0% over one year, the lowest for more than two years. years. Today’s statistic further distances the prospect of a rate hike from the American Federal Reserve. Moreover, the markets estimate the probability of a rate increase of 0.25 percentage points next month at 5.2%, compared to another 14.5% the day before, according to the CME FedWatch tool.
Lindsay Rosner, Head of Multi-Sector Investing for Fixed Income at Goldman Sachs Asset Management, dissected the most significant components, particularly on rent. Remember that, across the Atlantic, the CPI includes a rent component.
“Core CPI data released [Mardi] are below expectations. The market expected the figure to be higher in part because of “residual seasonality” and new source data that was incorporated into the health insurance calculation. However, the important indicator in terms of inflation is the rent equivalent for owners. There was a sharp reversal of the upward trend in housing last month which resulted in a significant deceleration in the sector. This should consolidate the Fed’s status quo in December.”
At midday on the foreign exchange market, the Euro was trading against $1.0850 approximately.
KEY GRAPHIC ELEMENTS
The structure of the consolidation after the candle in marubozu white mentioned above will be rich in lessons. The absence of bullish extension this morning suggests the formation of a consolidation on the upper part of the elongated body. A flag (pennant or flag) is the preferred option. A bullish entry point would then emerge.
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 1.0792 USD and resistance at 1.0929 USD.
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