EUR/USD: What room for maneuver for the ECB?

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The euro continued to gain its height – or your choice, the dollar continued to suffer, in a context of intense and uncertain trade war, where the lines are moving according to the alleged instinct of Donald Trump … Tomorrow, the European Central Bank (ECB) will have the heavy task of completing its council of governors under these flooded market conditions …

“The surprise announcement by Donald Trump of a temporary 90-day suspension of so-called” reciprocal “customs duties, accompanied by a 10 % lowering for countries that do not respond by countermeasures[…] has strengthened hopes for gradual appeasement and relaunched discussions on future sectoral negotiations, especially in semiconductors and the pharmaceutical sector. “Comments Thomas GIUDICI, head of bond management.

“However, the uncertainties remain numerous. If the American gesture has been welcomed, it does not sign the end of trade tensions, in particular vis-à-vis China, still targeted by customs duties of 145 % [hors smartphones et ordinateurs personnels]. The US budgetary file, with a provisional increase in sharp rise and a worrying debt trajectory, also continues to worry investors. Household inflation anticipations start upwards, while the Fed remains cautious in the face of the risk of an imported inflationary shock. ”

Thursday as seen in the preamble, the European Central Bank completes a Council of Governors – the equivalent of the FOMC for the Fed, with a consensus of decrease in the main key rate of 15 base points (PDB). This drop in rate, the magnitude of which can go up to 25 PDB, is widely acted, faced with the risk on growth, while remaining prudent for the future, in a route in roller coaster on the markets. Visibility in terms of rate of drop in rates will be greater in June.

“Given the high level of uncertainty, we do not provide for a change in the communication of the ECB: it will remain dependent on the data, with decisions taken meeting by meeting. Other short -term rate drops cannot be excluded, although the room for maneuver remains limited, in particular due to the German budgetary plan”, advances, without advancing, Ulrike Kastens, Senior Europe economist.

“The upheavals of the past few weeks are in fact reinforced by the monetary relaxation cycle initiated by the major central banks. The recent decisions of Donald Trump also lift a doubt for the European monetary institution based in Frankfurt which hesitated to continue its monetary relaxation program in the event that the Fed has stopped its own. But the announcements of the Trump administration should fuel a strong instability Overseas (2% of American GDP could be deducted from private players) and the Fed should be forced to continue its rate reductions despite inflationary tensions, “decrypts Maxime Mura, IG rate and credit manager of Swiss Life Asset Managers France.

In the statistical chapter on Tuesday, the markets took note of the collapse, even more violent than expected, of the ZEW index of confidence in the German economy, the first in the euro zone, going from 39.8 to -14.

The president of the ZEW Institute, Achim Wambach, has brought the following insights: “The erratic changes in American trade policy weigh heavily on expectations in Germany, which have decreased sharply. It is not only the consequences that the reciprocal customs duties announced could have on world trade, but also the dynamics of their evolution, which have considerably increased the world’s uncertainty. Germany and the euro zone reflect this development. “

To be continued this Wednesday retail sales in the United States, expected to increase monthly 0.4%, excluding motor vehicles. An indicator particularly followed in market halls, for an economy where structurally, domestic consumption is the pillar of national wealth creation.

At midday on the foreign exchange market, the euro was treated against approximately $ 1,1370.

Key graphics elements

Consolidation in triangle from 04 to 09 April is now over, the pair of currencies being violently out from the top. The energy released is important, but the ease with which the Eurusd shatters the resistances augurs for a pursuit of height. An accumulation zone between 1,1460 and 1,1674 is identified, as well as a bullish lens $ 1,1970.

Medium term

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

Our entry point is 1,1369 USD. The course of course in our Haussier scenario is 1,1970 USD. To preserve the committed capital, we advise you to position a protection stop at 1,1169 USD.

The profitability hope of this Forex strategy is 601 pips and the risk of loss is 200 pips.

Daily data graphics