EUR/USD: Crossing a remarkable technical level

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Major technical event yesterday on the foreign exchange market: the Euro/Dollar crossed, on a remarkable candle, a major resistance level, materialized by an oblique straight line with a bearish bias. And this in the wake of the reassuring publication of an inflation indicator closely followed by the Fed, retail prices.

Excluding food and energy, these consumer prices increased across the Atlantic in April by 0.3%, moderately therefore, and in line with the target. Over one year, these prices increased by 3.6%, compared to 3.8% the previous month.

Enough to cause an accentuation of the ebb movement on the American 10-year, now back at 4.33. This also brings relief to Fed executives, who have more arguments in their possession to leave the door open to a scenario of two cuts in Fed Funds by the end of the year. In the immediate future, the CME Group’s FedWatch tool puts the chances of seeing the Federal Reserve lowering key rates at nearly 35% (up, therefore) at the end of July. As a reminder, this valuable tool makes it possible to analyze the probabilities of changes in federal rates and American monetary policy based on the price of 30-day federal funds futures contracts.

We could “begin to think that the American economy needs to slow down a little more for the Fed to be convinced that inflation is indeed returning, and in a sustainable manner, towards the 2% objective, and thus proceeds with its first rate cut”, nuance Alexandre Baradez (IG France).

On the agenda this Thursday, to follow at 2:30 p.m. across the Atlantic the weekly registrations for unemployment benefits, the Philly Fed and housing construction permits, and at 3:15 p.m. the monthly report on the industry.

At midday on the foreign exchange market, the Euro was trading against $1.0870 approximately.

KEY GRAPHIC ELEMENTS

On marubozu of great magnitude, the currency pair shattered the technical resistance level constituted by the bearish oblique drawn in black. A recovery is underway, which may ultimately result in a pullback. The conditions in terms of entry point are not met to immediately build a position on the currency pair.

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 1.0550 USD and resistance at 1.0885 USD.

DAILY DATA CHART