EUR/USD: The single currency tries to cling to its fragile supports

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The Euro remained “in the tough” against the Dollar, in the short term, under the combined effect of the rise in 10-year US government bond yields, to the highest since the beginning of November, and geopolitical tensions exacerbated by East, mechanically weighing on risk appetite on the financial markets.

10-year Treasuries are heating up to 4.67%, while the latest economic data reinforces the prospect of a resilient American economy but also of persistent inflation. And, therefore, key rate cuts from the American Federal Reserve (Fed) which are becoming more distant. The latest example, retail sales, published on Monday, which heated up significantly more than the consensus would suggest.

Retail prices came out above expectations, at +0.4% in monthly data, excluding food and energy. On an annual basis, in the broadest base of products, prices increased by 3.5%, which represents a clear acceleration in inflation compared to February (+3.2%).

Prospects for regular and numerous rate cuts which are evaporating, therefore. J Powell, the head of the Fed, definitively endorsed the scenario, declaring yesterday in Washington that it “will take more time than expected”.

Investors continue to monitor the situation in the Middle East after Iran’s attack on Israel this weekend. Monday evening, the head of Israeli diplomacy, General Herzi Halevi declared that the army would “respond to the launch of so many missiles and drones”, according to comments reported by Agence France Presse (AFP). Remember that after ten days of rising tension, Iran launched a massive attack using drones and missiles against Israel on the night of Saturday April 13 to Sunday April 14. The international community is trying to coordinate its diplomatic efforts to encourage de-escalation and avoid conflagration in the Middle East.

Yesterday in terms of statistics, currency traders dealt with the sharp rise in the publication (42.9), beyond the expectations of the ZEW index of confidence in the German economy. RAS concerning the monthly federal report on industry, perfectly in line with expectations, whether on the volume of production (+0.4%) or the rate of utilization of production capacities (78.4%).

For the moment, no deviation to report compared to the first estimates on inflation figures (consumer prices) in the Euro Zone for the month of March. Excluding volatile elements (food, energy, alcohol and tobacco), prices increased at an annual rate of 2.9%. This is stable compared to February. The next publication of the flash estimate of euro area inflation, including data for April 2024, is scheduled for April 30, 2024.

At midday on the foreign exchange market, the Euro was trading against $1.0645 approximately.

KEY GRAPHIC ELEMENTS

The 20-day moving average (in dark blue) has just fallen below the 50-day moving average (in orange), itself in a bearish inflection phase. The succession, in three days, of two candles with elongated red bodies (April 10 and 12), shows a change in the psychological state of the market with regard to the single currency in the short term.

MEDIUM TERM FORECAST

Considering the key graphical factors 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 1.0550 USD and resistance at 1.0693 USD.

DAILY DATA CHART