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#1 08-09-2020 11:32:06

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: $1,1750 - between support and a guardrail

EUR/USD: $1,1750 - between support and a guardrail


The Euro, although benefiting from a bullish bottom bias against the USD, was getting dangerously close to the major and high-stakes technical zone of $1.1745/$1.1750, in a context of shrinking risk appetite. In the absence of a benchmark from Wall Street on Monday, which remained closed due to the bank holiday, forex traders continued to digest the NFP (U.S. Employment) report for last month.

The Bureau of Labor Statistics says: "The improvement of the labour market reflects the continued recovery of economic activity that had been reduced due to the virus situation and the efforts to contain it. Last month, an increase in employment largely reflected temporary hiring. Notable job gains were also made in retail trade, professional and business services, recreation and hospitality, and education and health services".

Germany, the largest Euro economy, has been the country with the largest, or at least most potentially high-impact, statistical figures since the beginning of the week. Germany's dynamic industrial production in July, which had a clearly disappointing effect, came out on Monday at +1.1% on a monthly basis, compared to +4.4% expected. On the other hand, the trade balance surplus, published at 08:00 on Tuesday for July, exceeded expectations, at +17.9 billion euros.

A certain wait-and-see attitude could be felt between now and the European Central Bank's decision on Thursday. The debate around and within the institution is intensifying in the face of the recent appreciation of the euro and deflationary pressures, and Christine Lagarde could give some indications to calm the movement on currencies. However, few economists expect major decisions this time around.

Frank Dixmier, a CIO at Allianz Global Investors, says: "The European Central Bank's back-to-school meeting should be less full of announcements than the US Federal Reserve's speech in Jackson Hole. Its strategic review is not expected until next year, and the latest figures for recovery or inflation do not seem to justify further monetary policy measures at this stage."

Dimier adds: "Nevertheless, it is likely that the Central Bank will amplify its action in the coming months, as the new measures could include an extension of the amounts of the PEPP, which the ECB considers its most effective tool, or a modification of its parameters, which can be adjusted at any time. More favourable conditions on T-LTROs also seem to us possible. On the other hand, a drop in the deposit rate, which would revive the sensitive debate on negative interest rates, seems to us more difficult to anticipate".

To be followed by consumer credit volumes in the United States at noon (NY time). Still across the Atlantic, the NFIB index of the economic health of small businesses was published at noon (Paris time), and this month it has just passed the 100 mark, slightly above expectations.

As of now, the pair is trading at $1.1788.

MEDIUM TERM FORECAST

With regard to the key chart elements mentioned recently, our opinion is neutral in the medium term on the pair.

We will maintain this neutral opinion as long as the eurodollar is positioned between the support at $1.1745 and resistance at $1.2000.

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