EUR/USD: confirmation of consolidation

The EUR has been following the trend of profit-taking in the major European equity markets. Also, the USD regained some colour since the release of a much less catastrophic federal jobs report than expected.

As a reminder, last weekend, as a statistical highlight, the NFP (Non Farm Payroll) report on U.S. employment was released. And it must be said that the monthly federal data for last month is less catastrophic than expected. So, while the period of containment, which caused the economy to go into a tailspin, did result in a historic jump in the unemployment rate, to 13.6%, this compares with a much more pessimistic median consensus at 19.3%. The dynamics of average hourly wages, which were little affected at the beginning of the containment period, are now markedly negative, at -0.9% on a monthly basis. Finally, to make matters worse, the US economy has halted the process of job destruction in the private sector (excluding agriculture) and has created 2,499,500 jobs! It was this much faster than expected reversal of steam that fuelled risk appetite at the end of last week.

Now, currency traders are already looking ahead to Wednesday's Fed policy meeting, as there haven't been any other major economic results since Monday. This will be a great opportunity to see the continued support of the powerful monetary institution led by Powell.

In terms of statistics, there were few sharp points to report in the first part of the week. However, this morning's revised Eurozone GDP data for the first quarter of the year is worth noting. Q1 GDP fell by 3.6% quarter-on-quarter in Europe. Eurostat says: "This is the largest drop since the start of the time series 25 years ago. In March of this year, the last month of the period covered, the containment measures imposed by the virus situation started to be largely implemented by Member States. By the fourth quarter of last year, GDP had increased by just 0.1% in the monetary union".

Right now, the EUR/USD is trading at $1.1275.

KEY CHART ELEMENTS

The pair 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 The working basis that prevailed until then ($1.0790 - $1.1), is therefore no longer valid. The 100-day moving average (in orange), which has also been exceeded without any hesitation, is even starting to move upwards. Without any meaningful charting entry point, forex traders will opt to avoid working trading 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 eurodollar exchange rate.

We will maintain this neutral view as long as the eurodollar is positioned between support at $1.1110 and resistance at $1.1440.