EUR/USD: What balance of power between doves and hawks?

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After the first part of J Powell’s hearing before Parliamentarians, which unsurprisingly was moderately dovish, the Dollar lost a few pips against the Euro. The first federal rate cuts should not occur until the end of the June FOMC at the earliest. The President of the Fed continues his biannual hearing before the Senators this Thursday.

“The Fed is reducing its securities portfolio at a predetermined speed of $95 billion per month at most, including $60 billion for Treasuries,” says Axel Botte, head of market strategy at Ostrum AM. “The deleterious political situation, linked to the presidential election in the fall and a significant federal deficit, is campaigning for a reduction to $30 billion per month of the amounts not reinvested, in order to avoid the return of tensions on the repo market and a congestion of the American bond market “This is the first concrete decision to ease monetary policy, before the rate cuts which should take place from June.”

Currency traders will be attentive this Thursday to the tone of Ms. Lagarde’s speech (2:45 p.m.) at a press conference at the end of a new ECB Governing Council. Council which should, barring any huge surprises, result in a monetary status quo (4.50%).

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.

To follow the weekly registrations for unemployment benefits at 2:30 p.m.

At midday on the foreign exchange market, the Euro was trading against $1.0895 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