EUR/USD: Traders await next catalyst

KEY GRAPHIC ELEMENTS

Traders are expected to hold their positions today as no major macroeconomic information is expected. However, the next few days will be particularly lively with inflation, GDP and employment indicators to be published in the United States. Investors remain focused at this stage on the speech delivered last week by the chairman of the US central bank, who announced that the time for a rate cut had come. This rate cut should therefore take place at the September meeting. In the meantime, investors are now integrating this new paradigm and continuing to bet on a strengthening of the currencies of different countries against the dollar. For example, in addition to the euro, the pound sterling reached its highest level against the dollar since March 2022, as investors prepare for the US Federal Reserve to start lowering its rates faster than the UK central bank. The market is now wondering about the pace of rate cuts by central banks. On this occasion, the market is bringing out specific vocabulary to present its ideas, including the notion of a “jumbo cut”. In monetary policy, a “jumbo cut” refers to a massive reduction in interest rates by a central bank. This term is used to describe a rate cut that is much larger than standard adjustments. For example, while a standard rate cut could be 0.25% or 0.50%, as expected for the next Fed meeting, with investors hesitating between 25 basis points at 70% and 50 basis points at 30%, a “jumbo cut” could be a reduction of 1% or more in one go. Be careful, if this decision were to occur, it would not be a positive signal for the market. Indeed, these drastic reductions are generally made in response to a major economic or financial crisis, when the central bank believes that rapid and decisive action is necessary to stimulate the economy, encourage investment and consumption, and prevent a more serious recession.

Technical Section: The European currency is in line with the scenario announced for several days: little upside potential in the very short term, it is risky to position oneself for sale while the trend is bullish and not weakening. We must continue to wait for a return to the 20-period daily moving average to intervene in the direction of the bullish trend. For those positioned for purchase, the short-term objective is the resistance at 1.1250.

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 1.1134 USD and the resistance at 1.1250 USD.

DAILY DATA CHART