EUR/USD: Core PCE prices expected to increase monthly by 0.3%

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Above a bearish oblique which serves as a point of support, the EURUSD currency pair stabilized, in a foreign exchange market which requires seeing more clearly and further into the intentions of the major central banks on both sides. and other from the Atlantic.

The ECB, which is meeting its Board of Governors next week, “cannot go back any further”, in the words of Thomas Giudici, head of bond management at Auris Gestion. “The ECB has almost committed to this: it will lower key rates at its monetary policy meeting next week. Any other decision would be catastrophic for the markets which are unanimously anticipating this movement.” After which a break in July should be in order.

“As Philip Lane, the ECB’s chief economist, recalled, monetary policy should remain restrictive until 2025. But with key rates at 4% for a neutral rate estimated at 2.5%, the ” margin is significant” according to François Villeroy de Galhau.”

As for the Fed, it concludes its next FOMC (Fed Monetary Policy Committee) on June 12; FOMC which will also be closely followed because it is accompanied by the updating of economic projections. For the rates themselves, a status quo is almost confirmed, with a 99% probability according to the CME’s FedWatch tool. The valuable tool, which makes it possible to gauge the probabilities of changes in federal rates and American monetary policy based on the price of 30-day federal funds futures contracts, estimates that the chances of a loosening of the monetary tap for the FOMC deadline at the end of July.

To follow the Richmond Fed manufacturing index at 4:00 p.m. The agenda will become significantly denser from tomorrow with preliminary US Q1 GDP data, registrations for unemployment benefits and current housing sales, but especially on Friday with, as a statistical highlight, PCE core prices, the measure of predilection of the Fed in its assessment of inflation. These prices are expected to increase monthly, excluding food and energy, by 0.3%, compared to 0.3% the previous month. Any excess of the target would cause turmoil in the bond market. A look at the American 10-year, which is heating up again, beyond 4.50%.

Yesterday Tuesday, still in terms of statistics, it was the American consumer confidence index which constituted the main “attraction”. The barometer of the main engine of wealth creation across the Atlantic has risen well above 100 points, to 102, largely beating expectations, and adding fuel to the mill of the most “hawkish” members of the Fed.

At midday on the foreign exchange market, the Euro was trading against $1.0840 approximately.

KEY GRAPHIC ELEMENTS

On large-scale marubozu, 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