EUR/USD: Sintra, US employment, European CPIs and French politics on the menu…

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The Euro/Dollar currency pair did not confirm on Tuesday the good mood seen the day before in the wake of the results of the French legislative elections. Results which have, at first sight, removed the danger of an absolute majority of parties whose programs constitute a risk for the already shaky public finances.

As a reminder, the RN (+ Les Républicains who allied themselves with it) obtained 33.15% of the votes cast, ahead of the New Popular Front (NFP), credited with 27.98%, and the presidential list “Ensemble” (20.76%).

“Even if the probability of an absolute majority for the National Rally is not completely zero at this stage, the first declarations of the different political parties on possible withdrawals and therefore the opening of negotiations with a view to the second round will make the scenario of an absolute majority difficult”, explains Alexandre Baradez (IG France).

A period of negotiations thus begins, which will materialize at the level of the rest of the vote, by the withdrawal of numerous candidates, in the case of “triangular” or “quadrangular”, that is to say when 3 or 4 candidates are in a “ballot”.

“These negotiations will also probably allow for smoothing over the most radical political proposals formulated during the campaign by certain political parties, these radical measures which are typically those which frighten the markets.”

Nomura analysts believe that “the French elections could cloud the inflation narrative at the upcoming ECB conference in Sintra this week. The ECB will try to bring the inflation narrative back, but market attention will likely be entirely focused on the elections.”

On the other side of the Atlantic, “the American economy is continuing its desired soft landing. The visibility offered by the United States is very appreciable in these uncertain times.” Emmanuel Auboyneau, Managing Partner, Amplegest. A working hypothesis further supported yesterday by the ISM manufacturing index, which came out below expectations at 48.50. Employment, which is the statistical thread of the week, will further validate, or not, the quality of the landing.

In the immediate future, currency traders have taken note of the first estimates of consumer prices in the Eurozone for the month of June. Consumer prices, excluding food, energy, alcohol and tobacco, have risen by 2.9% on an annual basis, slightly above the consensus (+2.8%).

Coming up at 4:00 p.m. are the new job offers (JOLTS) in the United States. The week will be rich in employment benchmarks, with the statistical highlight on Friday being the NFP (non farm payrolls) report on the health of private employment, excluding agriculture, across the Atlantic. Coming up at 3:30 p.m. are speeches by J Powell, President of the Fed, and C Lagarde, President of the ECB, at the ECB forum in Sintra, Portugal.

At midday on the foreign exchange market, the Euro was trading against $1,0710 approximately.

KEY GRAPHIC ELEMENTS

In a strong volatility, the Euro / Dollar currency pair has regained the upper part of a bearish oblique line, constituting a short-term oxygen supply. The technical signals are contradictory in the immediate future and do not allow a serene position-taking. In any case, we are suspending our sell lines.

MEDIUM TERM FORECAST

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

We will maintain this neutral opinion as long as the Euro Dollar (EURUSD) parity rates are positioned between the support at 1.0664 USD and the resistance at 1.0758 USD.

DAILY DATA CHART