EUR/USD: the bearish corridor remains valid

The euro continues, in the very short term, a phase of lateralisation without firm support, in the heart of a bearish channel (see chart below). Forex traders will remain attentive to the yields of 10-year Treasuries in the United States, while the bond market will undergo a new test this week, with in particular on the macroeconomic front the publication of US retail sales on Thursday, a key index in a country where consumption traditionally remains the main engine of national wealth creation.

In a speech on Sunday evening, Powell assured that inflation, fuelled by the prospect of an economic recovery, should only be temporary. The comments come as inflation fears pushed the yield on the 10-year US Treasury note up last month to its highest levels since early 2020. "Rates will remain the number one issue for some time and will continue to drive the equity market and even more so during this earnings season," says Stephen Inns, strategist at Axi. Investors are concerned that a price run-up could lead to faster than expected monetary tightening.

Last week's Fed Minutes were a highlight, but ultimately unsurprising. The minutes reflected the fact that its members believe that they are still far from their objectives, in terms of employment and inflation (the 2% target). The minutes were expected after the IMF raised its growth projections, raising fears of an "out of sync" recovery, which would be accentuated by a rise in US interest rates.

Yesterday's eurozone retail sales figures, published by Eurostat, exceeded the target in February (+2.9% in monthly terms), without causing a lag in the currency pair. In January, the volume of retail trade fell by 5.1% in the Euro Zone and 4.7% in the EU, the European statistical office added. The main figure this morning on the European side was the surprise decline in investor sentiment in Germany as measured by the ZEW, which fell to 70.6, marking the end of an uninterrupted rise since November and the first announcements of major successes in vaccine research against the SARS-Cov2 infection.

"Financial market experts are a little less euphoric than in the previous month. However, the ZEW economic sentiment indicator is still at a very high level and the current situation is assessed much more positively than in March. Fears of a tighter lockdown have led to a drop in private consumption expectations. Nevertheless, the export outlook is better than in the previous month," says ZEW President Professor Achim Wambach.

KEY CHART ELEMENTS
On a remarkable combination of Japanese candlesticks (30 and 31 March, then 1 April), the spot resumed support on the lower limit of a bearish channel, with confirmation by amplification of variation on 5 and 6 April, on daily candles with very long bodies. This buying reaction of protest stalled (Wednesday's doji). The cursor has been switched to neutral in the absence of clear signals, while keeping in mind that the bearish channel still makes technical sense.

MEDIUM TERM FORECAST
Based on the key chart factors we have mentioned, our medium-term view on the EUR/USD is neutral.

We will maintain this neutral view as long as the pair is positioned between support at $1.1745 and resistance at $1.1964.