EUR/USD: The decline in federal rates will be slow

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The Euro Dollar continued its consolidation movement in a pennant, above an oblique crossed energetically on May 15 in a foreign exchange market relieved by the American inflation figures.

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.

However, two Fed executives, Michael Barr, vice-president of the Federal Reserve in charge of banking regulation, and Philip Jefferson, another vice-president of the Fed, insisted that a restrictive monetary policy should remain the norm. a long time to go for a truly effective fight against inflation. A normalization of the job market, still under strong tension, is necessary.

In the process, 10-year Treasuries regained a few points towards 4.43, after falling to 4.33 on 05/15 following the publication of the CPI.

“After short-term observations, we can however consider that the progress made in recent months has been made with difficulty. In 8 months, underlying inflation (CPI core) has only slowed by 0.5%. And “this echoes the numerous declarations of members of the Fed, including those of its president, highlighting the lack of significant progress in recent months”, Alexandre Baradez (IG France) had nuanced after this key publication.

“We could therefore 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 to its first rate cut.”

There was also talk of inflation on Friday May 17, on this side of the Atlantic. Forex traders have digested 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.

Not much to get your teeth into this Tuesday in terms of statistics, apart from the positive monthly balance of trade in the Euro Zone (+17.3 billion euros, below expectations). We will have to wait until Wednesday for the calendar to thicken somewhat, with sales of old homes across the Atlantic, but especially Thursday with PMI activity indicators in the Euro Zone and the closely monitored weekly registrations for unemployment benefits.

The Fed Minutes, the traditional report of the last monetary policy meeting (FOMC) will be published tomorrow.

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 1.0758 USD and resistance at 1.0885 USD.

DAILY DATA CHART