EUR/USD: On the way to the Board of Governors

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Two days before the end of a new ECB Governing Council, the Euro/Dollar currency pair continued its lateral transition phase between two remarkable moving averages, in decreasing volatility.

François Rimeu, senior strategist at La Française AM, thinks that “the ECB should try to buy time regarding its future decisions on lowering interest rates.”

“At the press conference, Christine Lagarde will likely keep a moderate tone and reaffirm the ECB’s firm commitment to bringing inflation back towards its 2% target. The economy is more resilient and inflation is falling more slowly than which was initially planned a few weeks ago. Therefore, a change in monetary policy stance is less urgent. The ECB still has time and can wait until June. We do not anticipate any notable movements financial markets following the ECB meeting.”

The resilience of underlying inflation, as well as the difficulties encountered by the German economy, the most powerful in the Eurozone, will inevitably be discussed.

The Sentix investor confidence index in the Euro Zone showed a slight increase yesterday although in negative territory, at -10.5. The institute provides the following commentary on the leading economic power in the Eurozone: “The German economy is increasingly turning into a ‘ghost train’. Given the improvement in global data, it is becoming increasingly increasingly obvious that it is Germany’s atypical, unfortunately ineffective, economic policy that is preventing a complete economic recovery in the heart of Europe. The recession remains ongoing and the data even continues to deteriorate. The situation is as fragile as it was in July 2020 in the middle of the Covid crisis.”

Once the Board of Governors concludes (Thursday), currency traders will be able to look ahead to the publication of the NFP (Non Farm Payrolls) report on American private employment. After more than 350,000 positions created in January in the private sector (excluding agriculture), the consensus does not exceed 200,000 for the month of February. The Fed will be sensitive to any confirmation of tensions on private employment, after confirmation, by the PCEs last week, that the return to the inflation target is not a linear path.

To follow the ISM services in the United States at 4:00 p.m. Note the final services PMI data in the Euro Zone, unsurprisingly, in the immediate vicinity of the 50 point mark which separates, by construction, an expansion from a contraction of the sector in question.

“The dynamism of the euro area services sector mainly reflects the good performance recorded in the south of the region. Services activity increased for a sixth consecutive month in Spain and for a second consecutive month in Italy, trends contrasting with the situation in Germany and France where the contraction continued,” detailed Dr. Cyrus de la Rubia, Chief Economist at the Hamburg Commercial Bank.

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

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. If the spot were to break its 20-day moving average in a significant level of volatility, we could then speak of a false exit since February 20. This dynamic level is to be monitored, therefore.

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