EUR/USD: the pair has broken out of the channel

The dollar continues to weaken against the euro, the latter even managing to break out of the upper limit of a bearish channel (see below), in a climate of acceptance and consensus on the Fed's determination to maintain ultra-accommodating conditions for a long time to come, and this despite enthusiastic signals on the quality of the recovery (see consumer prices and retail sales published last week). As long as full employment and the 2% inflation targets are not in sight, the powerful monetary institution headed by Powell will not tighten its tone. The dollar is therefore temporarily losing its appeal.

At the same time, the outcome of the ECB Governing Council meeting (Thursday) will be particularly closely watched in this context. "In the absence of an additional stimulus plan, and due to the delay in the provision of funds from the European recovery plan, the European Central Bank is once again on the front line," says Franck Dixmier (AllianzGI). "It is clear that the ECB will reiterate its desire to maintain the most favourable financial conditions for the euro zone. Especially as its message is working for the moment."

Thursday sees the ECB's monetary policy decision and Friday features a battery of PMI activity indicators.

KEY CHART ELEMENTS
No high shadow formed on Monday, just the daily candle, and unlike what happened on February 25, the bearish channel is losing its validity. We will, especially in view of the increase in volatility on Monday after three days of hesitation, tip the upper bound of this ex-corridor into support. A pullback on this level is not excluded.

MEDIUM-TERM FORECAST
Given the key chart factors we have mentioned, our medium-term view on the Euro Dollar (EURUSD) is neutral.

We will maintain this neutral view as long as the EUR/USD is positioned between support at $1.1964 and resistance at $1.2000.