EUR/USD: A fall in US rates at the start of the school year is clearly becoming clear

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The Euro/Dollar currency pair continued to retrace some of its losses, amid hopes of a soft landing scenario for the US economy. Hopes were fueled by a series of recent macroeconomic statistics, the most notable of which was the ISM Services, which came out well below the 50 mark, at 48.8, while this activity barometer was expected at 52.6.

On the other hand, weekly registrations came out in line with expectations, at 238,000 new units. But this was not the only statistic on employment since the ADP firm released its monthly copy, with 150,000 job creations in the private sector, which means a cooling of the employment machine… Enough to bring water to the mill of J Powell, who had been reassuring the day before, during a speech at the Sintra forum.

The tone of the Minutes published yesterday is along the same lines. The Minutes, as a reminder, are a document that compiles chronologically – hence their name – the debates that animated the last meeting of the Federal Open Market Committee (FOMC). Enough to significantly increase the probability of a federal rate cut at the end of the September FOMC, to more than 72% according to the CME Group’s FedWatch tool. A figure that should only move slightly this Thursday, while Wall Street is closed for a public holiday (4th of July, Independence Day), and which could fluctuate again in light of the results of the NFP (Non Farm Payrolls) report, a federal report on private employment that will be published tomorrow. The unemployment rate is expected to remain stable at 4.0% of the active population, and job creation in the non-agricultural private sector is expected to fall, below the 200,000 mark, to 194,000. This last indicator, and especially its deviation from the target, will be scrutinized.

On the European side, according to Eurostat earlier in the week, in the sense of retail prices, in the eurozone, inflation did indeed slow in June, settling at 2.5% over a year against 2.6% in May. But “core” inflation, excluding food and energy prices (and alcohol and tobacco) rose by 2.9%, more than the 2.8% anticipated by economists surveyed by Reuters. And this while the most influential central bankers in the world are gathered at the annual Forum organized by the European Central Bank in Sintra, Portugal.

According to Deutsche Bank, Christine Lagarde said the ECB still faces several uncertainties in its fight against inflation, including the evolution of wages, productivity and profits. The ECB president also added that the institution would need time to collect enough data to be sure that the risks of inflation above its target have been averted.

At midday on the foreign exchange market, the Euro was trading against $1.08 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 1.0885 USD.

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