EUR/USD: The single currency confirms its reaction

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The euro confirmed its reaction to the dollar on Friday, the day after a council of the Governors of the ECB which ended without surprise, with a drop of 25 basic points of the main guiding rate, with a subtle, but real trip, from the cursor to the “Hawkish” mode.

“Although uncertainty remains high, balance has changed considerably in recent days. We anticipate an acceleration of growth in the euro zone as well as slowdown in the disinflation process. All these elements greatly reduce the room for maneuver for new rate drops in the coming month,” comments Ulrike Kastens, senior Europe DWS economist.

The rates in Germany were mechanically tense after the main forces of the new coalition agreed on the end of the Budget Gold rule, opening the valves for massive investments in infrastructure and defense. Since

“The ECB has met expectations by reducing its rates, despite the increase in inflation forecasts following Germany’s decision to significantly increase its tax expenditure,” analyzes Matthew Morgan, head of the management of the BCE. “We believe that Germany’s decision can change the game for Europe in the long term, but we must also recognize the very important structural challenges with which the German (and therefore European) economy is currently confronted. The weakness of demography, the intensification of global competition and the rise in energy prices mean that short -term growth prospects remain low and that a new reduction seems justified at this stage.”

The dollar, for its part, suffered from the impetuous decisions and counter-discisions of Trump on customs duties. If a freezing of import prices from Canada and Mexico was pronounced until June 02, indecision remains for the future, and entering a total trade war between the United States and its main commercial “partners” remains possible.

During his speech before the Congress, the American president reaffirmed his strategic line of construction of customs barriers, while admitting certain “risks” inherent in the exercise …

In the statistical chapter, the operators learned on Thursday of weekly registrations for unemployment benefits across the Atlantic, after the disappointment aroused the day before by the conclusions of the investigation of the ADP. These registrations amount to 221,000, against expectations at 234,000. And it will still be a question of American employment this afternoon, a sector particularly monitored by the Fed. Go to 2:30 p.m. for this “non-Farm Payrolls”, the main benchmarks of which are the unemployment rate, the variation in average hourly wages and the number of positions in the private sector, excluding agriculture.

“This domination of the political scene complicates the reading of macroeconomic implications and could potentially weigh more on the American economy. Companies, initially optimistic in the face of deregulation and tax cuts, must now deal with tariff increases, a reduction in migrant labor and uncertainties on subsidies”, for Laura Corrieras, Equity Portfolio Manager at Indosuez Wealth Management.

At midday on the foreign exchange market, the euro was treated against $ 1,0860 approximately.

Key graphics elements

The crossing in significant volatility of $ 1,0608 changes the situation on the configuration of the currency pair, which has just validated a resumption of support on a long mobile average, at 50 days (in orange), which begins a resource figure. The scenario of a fast melting towards the perfect parity (€ 1 = $ 1) is invalidated.

Medium term

In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on Euro dollar parity (Eurusd).

We will keep this neutral opinion as long as the courses of Euro Dollar parity (EURUSD) are positioned between the support at 1,0608 USD and the resistance to 1,1012 USD.

Daily data graphics