EUR/USD: Dollar weakens

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Only a handful of sessions ago, the market was based on a clear working matrix: that of a soft landing for the American economy, a sort of scenario, legitimizing the beginning of a drop in federal rates, without going through the recession box. However, everything has been going crazy since Thursday and the publication of an indicator of industrial activity (the ISM manufacturing) which came out 2 points below expectations that were themselves already well below the 50-point threshold. And the nail was hammered home the next day with the publication of the NFP report, a federal report on the health of private employment in the United States.

Regarding this report, which is closely followed: the unemployment rate rose significantly, to 4.3% of the working population, and job creation collapsed in July, to 114,000. “This very mediocre job report corresponds fairly broadly to the ‘unexpected weakening of the labor market’ that Fed Chairman Jerome Powell has been talking about for several months and which would be a justification for rushing rate cuts. The unemployment rate is now significantly above what Fed members have forecast for the end of the year and a rate cut of 50 basis points (0.50 percentage point, Editor’s note) in September can no longer be ruled out,” explains Bastien Drut, head of strategy and economic studies at CPRAM.

It is in this very heavy context that traders will learn the final data from the American ISM services on Monday, at 4:00 p.m. In the immediate future, it is the final data from the Eurozone services PMI, which have just been published, at 51.9 points, with no deviation from the first estimates. In addition, the Sentix index of investor confidence in the monetary union has melted to -13.9.

This new situation has caused the single currency to jump against the Dollar, or rather caused the greenback to falter. The spot, which was trading at $1.0782 at its lowest on Friday, hit $1.0975 at its highest this morning.

At midday on the foreign exchange market, the Euro was trading against $1,0950 approximately.

KEY GRAPHIC ELEMENTS

Our short positions are immediately stopped on the EURUSD currency pair, with the volatility that exploded on Friday. We remain waiting for clear signals allowing us to glimpse a new sustainable directional, before exposing ourselves again.

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 1.1012 USD.

DAILY DATA CHART