EUR/USD: Major central bankers will not let their guard down

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The Euro/Dollar currency pair continued to move within very narrow margins in the immediate vicinity of the upper limit of the Bollinger bands (20;2.5) in decreasing volatility, ahead of the highly anticipated publication on Thursday , PCE prices (personal consumption index).

This is the Fed’s preferred measure of inflation. “The consensus stands at +0.4% for “core” PCE inflation in monthly variation, which would be the strongest progression observed since February 2023. On the other hand, the consensus is +2.8% in annual data, which would mark a continuation of the improvement towards the Fed’s objective of 2%, knowing that the figure stood at 2.9% in January”, notes Alexandre Baradez (IG France).

Note that the core PCE (excluding food and energy), due to its calculation methodology different from the CPI, is indeed the Fed’s preferred inflationary gauge, the one which influences it the most in the construction of its monetary strategy.

In the meantime, currency traders were able to take note this Tuesday of the consumer confidence index (Conference Board), expected to be firm and stable at 114.8.

“The American economy continues to surprise upward expectations driven by a resilient consumer” for Alexandre Drabowicz, Chief Investment Officer, Indosuez Wealth Management. “A dynamic which leads us to be more confident about American growth in 2024, which we have revised upwards from 1.4% to 2.3% on an annual average. Robust growth which should be accompanied by a continuation of disinflation movement allowing the Federal Reserve (Fed) to begin adjusting the restrictive nature of its monetary policy during the second quarter of 2024.”

At midday on the foreign exchange market, the Euro was trading against around $1.0850.

KEY GRAPHIC ELEMENTS

The 20-day moving average (in dark blue), which until now conveniently served us as a trailing stop, has been clearly exceeded. We therefore no longer offer short positions, and remain on the lookout for a new attractive entry point.

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 1.0810 USD and resistance at 1.0940 USD.

DAILY DATA CHART