EUR/USD: The Dollar’s Earning Potential in Question

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Little change in the market psychology governing the Euro/Dollar currency pair, with pressure being put on both the single currency, against a backdrop of fears of political paralysis in France, and on the greenback, whose “remuneration” potential is being undermined by the increasingly clear prospect of a fall in federal rates at the start of the school year.

The tone adopted by J Powell before the Parliamentarians, in a half-yearly hearing this week, the fall of the ISM services below the 50 point mark last week, as well as the content of the latest federal employment report all argue, together, for a scenario of a soft landing for the American economy.

Fed Chairman J Powell was grilled for the second day of questions from US Congressmen. The day before, before the Senators, the central banker said that maintaining an overly restrictive monetary policy “could unduly weaken economic activity and employment” and that “labor market conditions have now cooled considerably,” Deutsche Bank noted.

“So there was a recognition of the risk of waiting too long,” the German bank concluded. Jerome Powell spoke on Wednesday, this time before a committee of the House of Representatives. But his speech on Tuesday, which highlighted “progress” on inflation, was little changed.

A confirmation of this working matrix is ​​expected this Thursday, with the statistical highlight, at 2:30 p.m., the publication of consumer prices. These prices are expected to slow down to 3.1% on an annual basis in the broadest basket of products. In this context, the CME Group’s FedWatch tool now puts the probability of a first loosening of the monetary tap by direct action on rates at over 75% following the next FOMC on September 17 and 18.

In France, no name has emerged for the post of Prime Minister, even whose camp is not obvious. The President clearly said in a letter to the French that “no one[avait] carried away at the end of these early legislative elections. Yesterday, on the set of France Télévisions, Olivier Faure, First Secretary of the Socialist Party declared that “we are all thirsty to achieve a result”… In the meantime, the government of Gabriel Attal is managing current affairs.

At midday on the foreign exchange market, the Euro was trading against $1,0840 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.

DAILY DATA CHART