EUR/USD: After Father Christmas Powell, Mother Fouettard Lagarde?

(News Bulletin 247) – This article, with open access, is produced by the stock market analysis and strategy research team at News Bulletin 247. To ensure you don’t miss any opportunities, consult all the analyzes and discover our portfolios by accessing our Privileges area.

The Dollar lost a few more pips against the Euro, the day after a much more accommodating FOMC tone than expected. Currency traders were particularly surprised by dot plots. According to this document, the central bank members’ median projection for 2024 key rates stands at 4.6%, which implies a total of 75 basis points (0.75%) of rate cuts per year. next (or three cuts of 25 basis points). According to Bloomberg, economists did not expect as much. Following these announcements, the yield on the 10-year US sovereign bond collapsed, falling to less than 4% (3.964%), its lowest level since the end of July.

It is Christine Lagarde’s turn this Thursday to face the financial community at the end of the last Board of Governors of the year. “The ECB’s new projections for growth and inflation should be the main outcome of this meeting” for Patrick Barbe, Head of European Investment Grade Fixed Income at Neuberger Berman. “His previous expectations were for a rise in energy prices for the winter and, in the long term, inflation above the ECB’s target of 2%. The situation could, however, evolve downwards.”

Forex traders will try to further refine the estimated timetable for the first cut in key rates. “Our scenario foresees a first reduction in the ECB’s key rates from April,” says Maxime Mura, IG Rates and Credit Manager at Swiss Life Asset Managers France, optimistically. “According to our forecasts, the deposit rate should rise to 2.5% in December 2024, i.e. a cumulative drop of 1.5% over the year. This change in perspective takes into account the slowdown in inflation which is “revealed faster than expected. This decline in inflationary pressures demonstrated the effectiveness of the reaction of central banks in containing the surge in inflationary fever following the pandemic and the outbreak of war in Ukraine.”

Even if the boss of the ECB should be particularly careful in her speech, and not declare victory too early. Inflation, whose trend is now clearly downward, may experience bouts of volatility in the coming months. “Inflation has not yet been overcome and still requires vigilance. Ms. Lagarde will have no other choice than to remain very measured in her speech,” declares Emmanuel Auboyneau, Managing Partner of Amplegest, on the expectations of the ECB meeting.

Yesterday on the “macro” level, note the good surprise across the Atlantic in PPI (producer price index), a leading indicator of inflation, below expectations excluding food and energy, elements considered volatile. On the agenda this Thursday, to be followed as a priority the European monetary policy decision at 2:15 p.m., and the subsequent press conference at 2:45 p.m.. In the meantime, traders will be tracking important U.S. indicators, like retail sales and weekly jobless claims.

At midday on the foreign exchange market, the Euro was trading against $1.0910 approximately.

KEY GRAPHIC ELEMENTS

Since November 29, the Euro/Dollar has almost completely retraced the gains made from November 14 to 28, but with no indication of an imminent restart. The opinion will remain neutral above the low points of the candle in marubozu blank of November 14. A side band is emerging.

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