EUR/USD: the pair is locked in a narrow technical frame

The euro is down slightly against the USD as of right now, in a currency market that is just ahead of the US ballot box, and in the context of a second wave of epidemics in Europe, which pushed governments to take new restrictive measures. We are also waiting for a new Governing Council of the ECB, which will end this Thursday.

"The tone of the European Central Bank (ECB) meeting on Thursday should be resolutely pessimistic. The ECB should highlight the deterioration of the macroeconomic outlook due to the new restrictions linked to the worsening of the health crisis, and its concerns about a possible double dip for growth", anticipates Franck Dimier (Allianz), who adds: "It is likely that the extension of the PEPP will provoke internal debates within the ECB Governing Council. Indeed, the old divide between doves and hawks has resurfaced. Mrs. Lagarde, who favours the search for a consensus, will have a lot of work to do to settle an already old debate on the risk of seeing an even more aggressive policy of buying government bonds qualified as monetary financing of public deficits, prohibited by the treaties".

For the time being, the tepidness of the oscillations against the USD is gauged by the disappointing publication of the IFO business climate index in Germany. The barometer indicator, which is particularly well monitored in the trading rooms, contracted to 92.7 points, missing expectations. Clemens Fuest, President of the IFO Institute, points out that, looking at the industry alone, "the business climate indicator is back in positive territory for the first time since the early summer of last year. Many other companies are satisfied with their current situation. In the last quarter, companies managed to significantly increase their capacity utilisation rate from 74.9% to 80.0%. However, the recent optimism about the coming months has dissolved".

New home sales in the United States are due to follow today at 15:00.

As of right now, the pair is trading at $1.1823.

MEDIUM-TERM FORECAST
In view of the key factors we have mentioned, our opinion is neutral in the medium term on the Euro Dollar's (EUR/USD) exchange rate.

We will maintain this neutral view as long as EUR/USD rates are positioned between support at $1.1745 and resistance at $1.1900.