EUR/USD: Very clear pullback

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The Euro/Dollar currency pair regained a few pips in the wake of the European Central Bank Governing Council which ended in surprise for a new loosening of the monetary tap, by 25 basis points. The powerful pan-European monetary institution lowered (slightly), but for 2024, 2025 and 2026, growth.

William Vaughan, Associate Portfolio Manager at Brandywine Global (a subsidiary of Franklin Templeton), continues “to believe the ECB will cut rates to a neutral stance around 2%, probably at a pace of once a quarter, with the next cut in December.”

“However, the new macroeconomic forecasts published were interesting as they continue to overestimate growth over the coming years and will continue to be revised downwards over the next few forecast cycles. The ECB’s rate-cutting cycle could accelerate if growth continues to disappoint,” the asset manager notes.

“Mr Draghi’s recent report highlights some of the key challenges facing the eurozone, but spending more than €700 billion a year, as has been suggested, seems unrealistic given the current political climate,” notes William Vaughan, Associate Portfolio Manager at Brandywine Global. “Without significant fiscal changes, it is difficult to see a major growth catalyst emerging in Europe any time soon.”

In the statistical chapter on Thursday, traders took note of American producer prices, up 0.3% on a monthly basis, excluding food and energy, a dynamic slightly higher than expected (+0.2%) and in July (-0.2%). As a reminder on Tuesday, investors took note of consumer price indices across the Atlantic for the month of August, whose dynamic increased by 0.3% excluding food and energy, against a target of +0.2%. No surprises, however, on prices in the broadest product range, slowing very markedly on an annual basis, at +2.5%, in line with expectations. Enough to leave the door open to a first cut in federal rates of a magnitude of 50 basis points on September 18.

In the immediate future, currency traders have just become aware of a monthly contraction in industrial production in the Eurozone (-0.3%) which was less severe than anticipated (-0.6%), which provides some support to the single currency, in the context of chronic fear over the health of industry in Germany.

Coming at 4:00 p.m. are preliminary data from the consumer confidence index (University of Michigan).

At midday on the foreign exchange market, the Euro was trading against $1,1090 approximately.

KEY GRAPHIC ELEMENTS

The Euro/Dollar currency pair, in the form of a very clear pullback (graphic rejection), has returned to contact with an oblique line (in black) which materializes the neckline of a bearish shoulder, head and shoulders pattern. Bearish positions will be reactivated as soon as the spot passes below this graphic level.

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 1.1012 USD and the resistance at 1.1134 USD.

DAILY DATA CHART