EUR/USD: March is too early…

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The Euro/Dollar currency pair was moving this Wednesday within increasingly narrow margins as the end of the Fed’s monetary policy meeting approaches. The initiatives are suspended, not on the verdict – a status quo is acquired – but on the elements of language which will be used at the press conference. Will these be likely to reinforce the likelihood of a first reduction in Fed Funds before June?

One thing is certain, “the Fed can boast of having time to act”, appreciates Thomas Giudici, head of bond management at Auris Gestion.

“American growth for the fourth quarter of 2023 thus came out very well above expectations at 3.3% at an annualized rate compared to a forecast of 2%. Given the restrictive context of monetary policy, the American economy is all truly exceptional! Driving growth, household consumption is more than resilient, with even an acceleration in services. Americans have clearly benefited from the increase in their real wages thanks to the ongoing disinflation movement, with PCE inflation increasing from 2.6% to 1.7% on an annual basis over the quarter.”

The American consumer confidence data (Conference Board index), coming out above expectations, reinforced this working matrix. New job offers (JOLTS) also argued for continued tensions, without wages overheating at this stage. We will also closely follow, on this central subject of private employment, the conclusions of the ADP survey at 2:15 p.m. before looking ahead to the January NFP report on Friday.

“After the European Central Bank which maintained its rates last week, today it is the turn of the Federal Reserve to seek to put an end to the idea of ​​a rate cut in March. This does not mean saying that the Fed will rule out the idea of ​​a rate cut, but simply that March is too early for a central bank that depends on data,” summarizes Michael Hewson of CMC Markets.

At midday on the foreign exchange market, the Euro was trading against $1.0840 approximately.

KEY GRAPHIC ELEMENTS

Interestingly technical fact, the 20-day moving average (in dark blue, bearish), is currently breaking its 50-day moving average (in orange, horizontal), a first contact since November 13. The graphic and technical situation is tensing under this trend curve.

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 1.0762 USD and resistance at 1.0940 USD.

DAILY DATA CHART