EUR/USD: Pullback in training

(News Bulletin 247) – This article, with open access, is produced by the stock market analysis and strategy research team at News Bulletin 247. To ensure you don’t miss any opportunities, consult all the analyzes and discover our portfolios by accessing our Privileges area.

The Euro, one of the most reliable barometers of risk appetite in financial markets, continued to form a pullback (graphic rejection) on a key technical level, namely a bearish oblique, crossed with energy on Wednesday in the wake of publication of reassuring figures on American inflation.

As a reminder, 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, currency traders are digesting the final consumer price data in April, for the Euro Zone this time, which EuroStat, the statistical office of the European Union, has just published. No deviation to report compared to the first estimates. Excluding food, energy, alcohol and tobacco, prices increased by 2.7% annually. Figures which are stable compared to March.

On the statistical side on Thursday, the day’s indicators (registrations for unemployment benefits, Philly Fed, housing starts and building permits) did not contain any unpleasant surprises (in the Fed’s sense!). Investors also took note of the publication of industrial production for April in the United States, which fell by 0.3% over one month. Which “continues the series of weaker activity data and will further reinforce expectations of a reduction in interest rates from the Fed (American Federal Reserve, Editor’s note) in September,” says Capital Economics. And on the production volume front, stable, and the production capacity utilization rate.

The CME Group’s FedWatch tool now puts the probability of a federal rate cut at the end of the FOMC on September 18 at 67.6%. The tool transcribes the probabilities of changes in federal rates and American monetary policy based on the price of 30-day federal funds futures contracts.

At midday on the foreign exchange market, the Euro was trading against $1.0840 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 1.0758 USD and resistance at 1.0855 USD.

DAILY DATA CHART