EUR/USD: Opposing forces at work

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The Euro Dollar was regaining balance, after the relative relief caused by the results of the second round of the legislative elections, and in the run-up to the biannual hearing of J Powell, Chairman of the Fed, before Parliamentarians.

According to the final data provided by the Ministry of the Interior, the New Popular Front Alliance comes in first with 182 seats, Ensemble cushions its fall with 168 seats, and the National Rally, although significantly increasing its contingent of deputies, only comes in third position, with 143 seats.

If the risk of an absolute majority of the National Rally, once feared by the market for multiple reasons, notably budgetary, everything is still to be built. Negotiations between political camps will begin, in order to be able, next step, to form a government.

“The risk premium on the euro seems to have already partly faded and we do not expect a surge in the EURUSD due to the lack of a clear majority,” according to Claudia Panseri, CIO of UBS Wealth Management France. “A risk premium should continue to be applied to French assets. A weak French government, less committed to reducing the budget deficit and undertaking reforms, could also slow the euro,” adds César Perez Ruiz, Chief Investment Officer and CIO at Pictet Wealth Management.

Across the Atlantic, government bond yields continue to ease, putting pressure on the greenback as a federal rate cut at the start of the school year becomes clearer.

“The employment report did not spoil the party in the United States. After a very disappointing ISM services index (48.8 vs. 52.7 expected), the official employment figures confirmed this trend. Job creation continued to fall (206k vs. 190k expected) and it should be noted that the estimates for May and April were revised downwards,” said Romane Ballin, bond manager at Auris Gestion.

To follow at 12:00 the NFIB index of American small businesses and at 16:00 the start of the biannual hearing of J Powell, Chairman of the Fed, before Parliamentarians.

At midday on the foreign exchange market, the Euro was trading against $1,0820 approximately.

KEY GRAPHIC ELEMENTS

In a strong volatility in week 27, the Euro / Dollar currency pair 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 1.0758 USD and the resistance at 1.0885 USD.

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