EUR/USD: The obsession with kicking off the rate cut

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Dead calm on the Euro Dollar parity, in a waiting position between two remarkable moving averages before the publication, tomorrow, of a report on private employment in the United States which will be closely followed. Indeed, this NFP (Non Farm Payrolls), if it were to confirm the trend towards a lull on the employment front in November, would encourage the Fed to deliver a less muscular speech on December 13 at the end of its last FOMC of the year.

So far anyway, the signs are encouraging this week, with the new job postings and the ADP survey both showing signs of easing tensions. Before the NFP tomorrow (2:30 p.m.), currency traders will focus this Thursday on weekly registrations for unemployment benefits and job cuts (Challenger).

On the European side, “bets” on an anticipated rate cut are strengthening, particularly since the recent “exit” of Isabel Schnabel, a member of the ECB Executive Board who is nevertheless considered a hawk (an intransigent central banker in the fight against inflation to summarize). She told Reuters that with inflation falling a further hike in the central bank’s key rates was now “rather unlikely”.

As a reminder, currency traders learned last week of the first estimates of consumer prices for the month of November in the Euro Zone. And surprise, the dynamic of slowing inflation is even greater than expected. Excluding food, energy, alcohol and tobacco (elements considered volatile), prices increased at an annualized rate of 3.6% in November, compared to a target of 3.9% and a month of October of 4.2%! A very significant slowdown which should bring a little flexibility to the ECB’s monetary policy.

“The larger-than-expected drop in inflation in November means it is becoming increasingly untenable for “European Central Bank (ECB) members” to pretend they are not even considering cutting rates “, explains Capital Economics. “We now expect a first drop for next June, rather than for September,” adds the think tank. All products combined, inflation is reduced to 2.4% according to this first estimate from EuroStat. The next publication covering all data for the month of November 2023 is scheduled for December 19, 2023.

To follow at 1:30 p.m. the job cuts (Challenger) and at 2:30 p.m. the weekly registrations for unemployment benefits.

At midday on the foreign exchange market, the Euro was trading against $1.0770

KEY GRAPHIC ELEMENTS

After a bullish runaway characterized by the candle in marubozu school on November 14, followed by a very short consolidation and an early bullish extension, a technical adjustment is underway, an adjustment catalyzed by the statistical publications of Thursday, November 30. The view is neutral in close proximity to the 20-day moving average (dark blue). A small “contrarian” type buying movement is however possible in the very short term, without there being any risk of exploiting it.

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 1.1012 USD.

DAILY DATA CHART