EUR/USD: Inversion of current polarity

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The euro rebalanced against the dollar at the end of a very complicated week, due on the one hand of the resolutely firm tone adopted by J Powell, the boss of the Fed, and a difficult digestion of the commercial agreement established between Washington and Beijing.

On Wednesday, on Wednesday, a new monetary policy committee of the FED, ended by a status quo on guiding rates – it was widely awaited. What was less so on the other hand is the tone hawkish From the boss of the Fed, which drastically reduces the probabilities of monetary easing at the end of the next deadline in September. D. Trump will be delighted …

We knew that Powell had been based for months for consumer health and employment to justify his prudent posture, while distrusting the potential inflationary consequences of the Trumpian trade war. But the resolutely offensive tone, even beyond prudence, will have surprised market workers on Wednesday evening. And that rebatts the cards from a technical and graphic point of view (see below).

Thus, the prospect of a growing gap in “remuneration” between the two currencies is strengthened in favor of the dollar.

“Jerome Powell insisted on a cautious approach and dependent on the data, without giving clear indications on the future trajectory of the rates. He even minimized the importance of the economic forecasts of June, which were tabling on two rate drops of 25 base points by the end

“The majority of the committee seems to expect sharper signals indicating a deterioration of the job market or stabilization of inflation anticipations. Recent data go in this direction, which could ultimately strengthen the probability of a drop in rates this fall.”

Yet the NFP (Non farm payrolls) should show private employment health, earlier at 2:30 p.m., and the very first GDP estimates in T2 (+3%) pleasantly surprised on Wednesday by coming out clearly beyond the consensus. This “advanced estimate of GDP in the second quarter revealed an annualized growth of 3.0 % of the US economy, after a contraction of 0.5 % in the first quarter. However, this improvement was driven by a drop in imports, reflecting the volatility of trade flows linked to customs tariffs”, deciphered Ms. Boxer.

In this context, American inflation is monitored like milk on fire by the rocks. “In the United States, inflation of personal consumer expenditure (PCE), the most closely monitored indicator monitored by the Federal Reserve, should reach a 3.4% peak towards the end of the year. Given the uncertainty surrounding the speed of transmission of the cost increase in input prices, we monitor the data displayed in real time on the websites of American retailers” Lombard Odier, Nannette Hechler-Fayd’Herbe, Samy Chaar and Filippo Pallotti.

The “PCE”, for Personal Consumption Expenditures, constitute the favorite gauge of the Fed in its appreciation of inflation. The indicator came out yesterday in accordance with expectations, up 0.3%.

In addition, on the customs front, the appetite for the risk, that the single currency reflects, is sealed by uncertainty on American customs duties. This Friday, August 1, the United States was to set up heavy customs from customs against the countries with which it had not reached an agreement.

President Donald Trump signed the decree establishing these new customs duties on Thursday. Their concrete application will come into force on August 7, time, for American customs, to organize.

“Trump also announced that customs duties on Canadian products would immediately increase from 25 % to 35 % (even if the products in accordance with the US-Mexico-Canada free trade agreement would remain exempt, which reduces the impact). Canada is therefore to a certain extent targeted,” writes Deutsche Bank.

Published this morning, European inflation data did not move away from the target, prices progressing in annual rate of 2.3% excluding food, alcohol, energy and tobacco in the first estimate for the month of July. As for the final data of the industrial PMI barometer in the euro zone, it complies with the first estimates, at 49.8, to a hair of the 50 points bar. Bar which is not symbolic, since in reality it separates an expansion (above) from a contraction (below) of the sector considered, by construction.

“It was the disappointing performance of France that mainly hampered the resumption of the region at the start of the third quarter” details Dr. Cyrus from Rubia, chief economist at the commercial Hamburg Bank.

“French industrial production fell for a second consecutive month when employment has increased slightly over the same period, testifying to a drop in productivity and more compromising the chances of economic growth in the country. The reverse occurred in Germany, where production has increased while employment has fell. The French situation also suffers from the budgetary savings proposed by Prime Minister François Bayrou and Government.

To follow the NFP (non -Farm Payrolls) report at 2:30 p.m. and the ISM industrial PMI at 4:00 p.m.

At midday on the foreign exchange market, the euro was treated against $ 1,1420 approximately.

Key graphics elements

We were waiting to see the nature of the passage under the mobile average at 50 days (in orange), a trend curve which hitherto constituted a dynamic area of graphic support, with precision. This is a break without hesitation, from July 28 to 30. The Haussier scenario is called into question at this stage, and let’s move on to “neutral” our opinion. A sweater On the evoked mobile average would only confirm this change in technical framework.

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 maintain this neutral opinion as long as the EURO Dollar parity prices (EURUSD) are positioned between the support at 1,1202 USD and the resistance to 1,1674 USD.

Daily data graphics