EUR/USD: all eyes are still on the virus, risk appetite remains low

Consolidation continues on the pair, as risk appetite is waning, with the legitimate but still little-expressed fears in the markets of a second virus wave. And this at a time when the first wave continues to hit the United States. Brazil also has worrying figures.

While it seems to be under control in most European countries, the virus situation is not under control in the United States, Latin America and India, which fears a worsening of the health crisis with the annual monsoon. And in China, the discovery in five days of more than a hundred sick people linked to a market in the capital was a shock, raising fears of a second virus situation in Beijing.

"The Chinese did not communicate this morning on the possible continuation of the virus situation but the increase in restrictions observed in Beijing since last weekend raises fears of a new major outbreak in the Chinal," warns Vincent Bay, GI France forex analyst.

On the statistical front, traders were relieved to see Wednesday's European inflation figures in line with expectations. Excluding food, energy, alcohol and tobacco (considered volatile), prices rose at an annualised rate of 0.8% last month. On the enlarged product base, inflation in the monetary union dips to +0.1%. For comparison, Eurostat says that a year earlier, inflation was +1.1% including volatile products, mainly gas. On the other side of the Atlantic, real estate benchmarks with housing sales and building permits are in slow progression.

MID-TERM FORECAST

In view of the above our opinion remains neutral in the medium term on the EUR/USD pair.

We will maintain this neutral view as long as the pair is positioned between support at $1.1109 and resistance at $1.1439.