EUR/USD: towards a neutral stance (for right now)

The eurodollar achieved and then confirmed a very clear exit from the range through the top, exceeding $1.1000 without any form of hesitation. The working basis which prevailed until then ($1.0790 - $1.10), is therefore no longer valid.

In statistical terms, there are no sharp European benchmarks to report on as of right now. Across the Atlantic, while last month's durable goods orders, although naturally in the bright red, came out above expectations, the same cannot be said for first-quarter GDP data, down 5% quarter-over-quarter, compared to -5.0% in the very first estimate. Lastly, weekly registrations for unemployment benefits once again reached disastrous levels, with 1,999,500 new registrations over the past week. The Department of Labour says: "The 5-week moving average was 2,598,000, a decrease of 440,000 from the revised average of the previous week." Meanwhile, ongoing home sales in the US have collapsed even more than the consensus had expected.

A number of economic stats (admittedly catastrophic) provide significant support for the single currency, which has already been boosted this week by the European Commission's proposal for a historic €749 billion stimulus fund.

Retail sales in Germany fell in April by 5.2% month-on-month, albeit at a rate well below the consensus of -11.5%. And estimates of Q1 GDP contraction in France have been readjusted by INSEE to -5.4% (from -6.0% initially). On the other hand, consumer spending in France last month turned out to be even weaker than expected, at -19.9% compared to the previous month. (I live in Paris and have litterally bought nothing outside of food and booze!)

The forex will remain on guard as Trump is expected to announce more measures against China. No schedule has been released by the White House yet, though.

As a reminder, the Trump administration is still threatening a shutdown of subcontracting activities of Chinese companies using US-designed components, and the threat of new restrictive rules for US investments in Chinese companies whose shares are listed in the US. And this at a time when China's announcement of a "national security" bill on Hong Kong against the local executive branch, following last year's demonstrations, has provoked anger at the White House.

As of now, the euro is trading at $1.1142.

KEY CHART ELEMENTS

As we said earlier, the eurodollar made and then confirmed a very clear exit from the range at the top, exceeding $1.10 without any form of hesitation. The working basis that prevailed until then ($1.0785 - $1.1000), is therefore no longer valid. The 100-day moving average (in orange) has also been exceeded without any hesitation, and is even starting to move upwards. Without any meaningful charting entry point, Forex traders will opt to avoid working the currency pair for the time being.

MEDIUM-TERM FORECAST

In view of the key chart factors we have mentioned, our opinion is neutral in the medium term on the EUR/USD.

We will maintain this neutral view as long as the eurodollar is positioned between support at $1.1108 and resistance at $1.1440.