EUR/USD: Recovery measures in China and French budget on the menu

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Despite fears of a widespread conflagration in the Middle East, the Euro/Dollar currency pair, a reliable marker of risk appetite, remained firm and close to its annual highs around $1.1190, currency traders ultimately showing confidence in the ability of the American economy to land “softly”, and satisfied by the extensive measures taken by Beijing to support, among other things, the real estate sector and consumption.

“In the United States, it was the employment figures in August and September that disappointed. Unemployment registrations and job applications increased significantly, calling attention to economists. Other economic statistics relating to consumption , investment or the confidence of economic agents remain positive, which validates our scenario of a soft landing for the American economy”, adds Emmanuel Auboyneau, AMPLEGEST Associate Manager.

The MSCI China gained another 4% after the new recovery measures announced.

Currency traders took note in particular on Friday, as a statistical highlight, of the PCE (personal consumption expenditures) prices, the Fed’s preferred measure in its assessment of inflation. Prices rose only very modestly, excluding volatile elements, by 0.1%, compared with a target of 0.2%. The consumer price index in the United States slowed to 2.2% year-on-year in August, compared to 2.3% expected by consensus and 2.5% the previous month. These signs of calm on prices are all the more appreciated as they maintain the hope of further rate cuts in the United States. Also released on Friday, revised consumer confidence index (U-Mich) data gained momentum, moderately above the target, crossing 70.

On the agenda this Monday, to follow in priority the Chicago PMI index at 3:00 p.m. and a speech by J Powell, President of the Fed, as part of a forum entitled “Point of view of the Federal Reserve Board” , during the annual meeting of the “National Association for Business Economics”, in Nashville (Tennessee). A question/answer session is expected.

Forex traders will be paying attention tomorrow to the general policy speech of Mr. Barnier, new Prime Minister of the second economic power in the Euro Zone.

“The stakes are high,” says Christopher Dembik, investment strategy advisor at Pictet AM. “The public deficit, initially forecast at 4.9% of GDP this year, should ultimately reach 6%. To reassure the European Commission and return to a more sustainable budgetary trajectory, it will be necessary to find at least 30 billion euros in savings next year (low estimate).”

“In 2017, the rate spread between the Portuguese 10-year and the French 10-year was 300 basis points. It is today negative (-20 basis points). This means that the markets have more confidence in finances Portuguese public authorities than in those of France. This is justified.”

At midday on the foreign exchange market, the Euro was trading against $1.1190 approximately.

KEY GRAPHIC ELEMENTS

The spot once again weakens an oblique line of graphic support, relaunching the idea of ​​the formation of a Chartist pattern. A clear break from this threshold would weaken the currency pair for the weeks to come. A neutral position is adopted while waiting, if necessary, for a signal.

MEDIUM TERM FORECAST

Considering the key graphical factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).

We will maintain this neutral opinion as long as Euro Dollar (EURUSD) prices are positioned between support at 1.1012 USD and resistance at 1.1250 USD.

DAILY DATA CHART