EUR/USD: the dollar seems to be taking a hit

The euro, the barometer of risk appetite par excellence in the financial markets, continued to benefit from the relief caused by the tone of President Trump's press conference on Saturday. He ordered his administration to revoke the special status granted to Hong Kong, but did not restart the trade war with China. The single currency, after a break on Monday, continues to progress this Tuesday beyond $1.1150.

In yesterday's stats, the final data for the industrial PMI in the Eurozone was confirmed at 40.0. "The index has recovered strongly from the historic low in April (33.5) but nevertheless continues to signal a very sharp deterioration in the economic situation. Indeed, despite the easing of containment measures In Europe, restrictions still imposed by governments to stem the spread of the coronavirus have continued to weigh heavily on the sector," says IHS Market.

Risk appetite was also maintained on the one hand by the PMI Caixin (indicator of industrial activity) in China, which regained the bar of 50 points, to place itself again in green territory, at 50.8. The US manufacturing PMI (ISM) certainly rose, to 42.9, but slightly below expectations.

No sharp macroeconomic figures, and especially with potential impact for the EUR/USD is on today's agenda. As of Wednesday, the agenda will intensify very markedly with, in particular, across the Atlantic, the results of the survey by the ADP cabinet on employment, PMI services (ISM), industrial orders and crude oil stocks.

At midday on the foreign exchange market, the Euro was trading at $1.1161.

Two elements capable of playing against the USD: one in the background, which is the severity of the virus situation in the United States, the world's most affected country. According to data compiled by John Hopkin University, the authority on the subject, more than 1,750,000 cases are reported in the United States, resulting in over 99,000 deaths.

The second is the conflagration of many American cities, no longer just Minneapolis, with very violent riots in reaction to the death of George Floyd, a black man who died following an arrest.

"On the economic front, the financial markets continue to dissociate themselves from the economic fundamentals, still supported by the massive injections of liquidity from the Fed and more recently by Europe's promises. Despite this observation, the announcements of bankruptcies and layoffs continue to ring and the economic rebound seems more and more distant." says Vince Bay, an IG France analyst.

KEY CHARTS

The eurodollar made - and then confirmed - a very clear exit from the range from above, exceeding $1.1050. The analytical foundation that prevailed until then ($1.0785-$1.1000), is therefore no longer valid. The 100-day moving average (in orange) was also exceeded without any form of hesitation, even initiating a movement of inflection. In the absence of any judicious graphic entry point, forex traders will opt to stay away from the pair at this time.

MEDIUM-TERM FORECAST

In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the eurodollar.

We will keep this neutral opinion as long as the Euro Dollar (EURUSD) price is positioned between support at $1.1110 and resistance at $1.1440.