EUR/USD: Redistribution of cards on foreign exchange

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The dollar suffered, naturally, from the risk of contraction of the American economy induced by the triggering of a trade war by Donald Trump, who erected customs herses around his fortress... Deutsche Bank notes that Donald Trump has not shown any sign of perspective on the reciprocal customs duties announced last week. The latter therefore entered into force this Wednesday, April 09. However, the euro, a barometer at the end of the appetite for the risk on the financial markets, did not extend its progress, starting a consolidation, while the Europeans agreed on a “calibrated” response, in a precise and strategic catalog of products.

On the Pacific Ocean side, unhappy with the Chinese response, the American president, Donald Trump, confirmed that additional customs duties of 54% will apply this Wednesday to China, bringing the total rate to 104%.

Proof of the cacophony which reigns within the American executive – as if the market needed a little more nervousness! – E Musk, a high counselor from the United States, has publicly dealt with Cretin Peter Navarro, the business advisor to Donald Trump. Tesla Elon Musk’s boss estimated, in two messages published on Tuesday on X, that Donald Trump’s commerce advisor Peter Navarro was a “moron” and “beast as his feet”. The richest man in the world, who has already reported his disagreement with the customs rights policy of which Peter Navarro is the great architect, wrote these comments under a video in which the trade advisor believes that Elon Musk “is not a car manufacturer” but only a “assembler”.

“According to the usual economic theory, customs duties lead to the assessment of the currency of the country which sets them up, in particular because they reduce the demand for currencies from other countries,” are the economists of Asteres. “Moreover, since the election of Donald Trump and until the month of March, the possibility of an increase in American customs duties, which was then anticipated moderate, had raised the dollar. However, since the trade war has intensified, the dollar fell. This paradox can be explained by the fact that, By braking American growth, general customs duties increase the probability of a drop in rates (if the Fed favors support for growth in the fight against inflation), making placements in dollars less attractive. A greater distrust of investors towards the United States due to a brutal and erratic policy can also explain the drop in the dollar. “

Volatility therefore mounted a notch on all of the asset classes (actions, rate, raw materials, changes), and the lack of visibility on the long -term consequences of a trade war of this intensity, have not finished freezing the atmosphere. “The drama of the trade war continues to wave the markets, and it is probably not over,” sums up Xavier Chapard, LBPAM strategist.

“If customs duties are generally close to today’s levels, we believe that This will push the American economy to the recession from the middle of the yearand will weigh significantly on the rest of the world. In this case, a sustainable market rebound seems difficult to envisage in the short term. Of course they would bounce clearly in the event of a sharp reduction in customs duties, but not completely given the level of uncertainty that would persist, “he develops.

At the macroeconomic agenda this Wednesday, to follow the US stocks in crude at 4:30 p.m. and the Fed minutes, traditional report of the last FOMC, at 8:00 p.m. Published yesterday the France’s trade deficit deteriorated in February, at almost 8 billion euros, against -6.5 billion euros, completely missing the target.

At midday on the foreign exchange market, the euro was treated against $ 1.1040 approximately.

Key graphics elements

After the very clear crossing of $,0608 the pair of currencies had entered a long -range lateralization phase, a phase now finished. A bullish outing is in full expression, even though the Bollinger bands go away strongly. Nevertheless in the short term, the early entry into consolidation is the predilection scenario, around the mobile average at 20 days (in dark blue).

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 EURO Dollar parity prices (EURUSD) are positioned between the support at 1,0758 USD and the resistance to USD 1,1012.

Daily data graphics