EUR/USD: Prices at production, then at consumption are eagerly awaited

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Currency traders must now deal with, not a dissociation, but a progressive decorrelation between monetary policies on both sides of the Atlantic, the American and European central banks not having the same room for maneuver to initiate a cycle. rate reduction.

On this side of the Atlantic the Bank of Sweden and the Bank of England have royally paved the way for the ECB for a first rate cut this summer, against a backdrop of “disinflationary trend [qui] is confirmed by the decline in producer prices in March”, for Romane Ballin, bond manager at Auris Gestion.

“The ECB should thus be able to initiate its monetary easing from June. The imminence of a reduction in rates is also reflected in the latest report from the ECB; some members even wanted to reduce them from April, although those – these only constituted a minority If an initial reduction seems certain, it is nevertheless important to keep in mind that the easing will, however, not necessarily be rapid,” explains the manager.

On the other hand, on the other side of the Atlantic, and although very recent encouraging signals on employment, growth and consumption have caused the American 10-year to decline, “concrete progress on inflation is nevertheless necessary in order to rule out the scenario of stagflation which remains, at this stage, a risk.”

It is in this context that we will carefully monitor the producer price indices this afternoon (2:30 p.m.) and above all, tomorrow as a highlight, the consumer price indices (CPI). Excluding food and energy, volatile elements, prices are expected to increase monthly by 0.3%.

“The markets are awaiting the US inflation figure for April published on Wednesday. This will be the first test after the reassuring meeting of the Fed (American Federal Reserve, Editor’s note) at the beginning of the month, when Powell indicated that the next change in the key rate should always be downward, even if the first reduction should occur later than they thought until then,” explains Xavier Chapard of LBPAM.

Immediately, currency traders have just become aware of the ZEW confidence index in the leading economic power of the Euro Zone, Germany, up to 47.1, beyond expectations. “Confidence is growing,” says ZEW President Professor Achim Wambach, regarding the results of the survey. “Following the stronger-than-expected growth of the German economy in the first quarter of 2024, both the assessment of the current situation and economic expectations have become more favorable. Signs of an economic recovery are increasing, reinforced by better This increased optimism is reflected in particular in the sharp rise in expectations for domestic consumption, followed by the construction and machinery sector. .

At midday on the foreign exchange market, the Euro was trading against $1.0790 approximately.

KEY GRAPHIC ELEMENTS

THE pullback very clear Thursday 04/18 on a resistance zone ($1.0693) will invite people to take short positions again on the currency pair EURUSD, especially since the break of the 50-day moving average (in orange) by its 20-day counterpart (in dark blue) took place at a relatively large angle. The succession of high points (12/28, 03/08, 03/21, 04/09 and 04/26) is now clearly decreasing, under an oblique line of resistance (in black).

MEDIUM TERM FORECAST

Considering the key graphical factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).

Our entry point is at 1.0796 USD. The price target for our bearish scenario is at 1.0436 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0886 USD.

The expected profitability of this Forex strategy is 360 pips and the risk of loss is 90.000000000001 pips.

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