(News Bulletin 247) – The Euro continued to suffer against the Dollar, at around $1.0560, in a thin tidy since the end of April, in the absence of risk appetite on the financial markets. Currency traders will turn their attention today to the inflation figures (CPI) in the United States, which “will be a major indicator for the markets. And take on a particular character because contrary to previous months, the consensus this time is for a less strong rise in prices“, for Alexandre Baradez (IG France). The challenge is to situate the inflation peak in time, and to gauge the possibilities, still very theoretical, of a slight easing of the brutal trajectory of the increase in federal key rates for the coming months.
“Summiting US inflation doesn’t necessarily mean a rapid relapse in prices, but markets could start to shift their one-way view and consider a more ‘consolidating’ stage. And that could start to show with a start. inflection of appetite for the dollar, thus benefiting the euro.”
On the largest basket of products, food and energy included, last month, the US Bureau of Labor Statistics published as a reminder an annualized price increase of +8.5%. Two major current events are being watched like milk on the fire as their outcome, near or far, may have a positive influence on prices: on the one hand the sudden curb of production capacities in China, the factory of the world suffering the intransigent policy of the authorities to fight against the Covid, and the war in Ukraine.
As Emmanuel Auboyneau (Amplegest) recognized in a recent research note, “the two uncertainties linked to the duration of the war in Ukraine and the importance of the wave of Covid in China make the analysis random in the short term. ” “In both cases, a rapid improvement would have immediate disinflationary effects (via raw materials for Ukraine and the restoration of the supply chain for China). A prolongation of these two hazards would only anchor the inflation at high levels” analyzed the manager.
Yesterday the single currency could not find a foothold in the German ZEW. The indicator came out above expectations, although in negative territory at -34.3. Professor Achim Wambach, President of ZEW, shed the following light:
“The ZEW Economic Sentiment Indicator has risen moderately this month but still remains at a relatively low level. Compared to last month, the outlook for the economic situation in Germany is therefore somewhat less pessimistic. Experts still assume that “It will continue to deteriorate, but at a slower pace than previously expected. Heavy restrictions in China to fight new Covid-19 infections are leading to a sharp decline in the toll of the current economic situation in China. This is a heavyweight for the future development of the German economy.Regarding the stance of the ECB’s monetary policy, a large majority of experts expect interest rates to rise over the next six months. As a result, they expect inflation rates to fall from their current very high level”.
A red cross is therefore ticked on the agenda of forex traders this Wednesday, at 2:30 p.m. (Paris time), with the various consumer price indices in the United States.
Also to follow are crude stocks at 4:30 p.m.
On the European side, Luis de Guindos, vice-president of the ECB, declared that inflation would remain at a firm level at the end of the year, between 4 and 4%. ECB President Christine Lagarde has confirmed that bond purchases will cease in July.
At midday on the foreign exchange market, the Euro was trading against $1.0560 approximately.
KEY GRAPHIC ELEMENTS
While the underlying bearish bias remains on the currency pair, the entry point is no longer optimal since the start of a rebound yesterday after the Fed’s decisions and the press conference. Forex traders will therefore prefer to stall, waiting for a much more interesting entry point.
MEDIUM TERM FORECAST
In view of the key graphic 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 the Euro Dollar (EURUSD) parity prices are positioned between the support at 1.0454 USD and the resistance at 1.0758 USD.
CHART IN DAILY DATA
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