EUR/USD: a series of encouraging activity barometer indicators

The EUR/USD reacted very little last week to the outcome of a highly anticipated Governing Council meeting, in form and substance. The currency pair gained a few pips, however, with no clear direction, with the very encouraging publication of the very first estimates of activity barometers in the Euro Zone (PMI by IHS Markit).

The European Central Bank, as expected, confirmed its monetary support measures for the economy, while the hoped-for rebound in activity is lagging. The president, Christine Lagarde, deemed it "premature" on Thursday to discuss a gradual end to the emergency monetary programme (PEPP) against the pandemic. Pessimistic about the short-term economic outlook, Christine Lagarde is nevertheless betting on "a firm rebound in activity" within the year thanks to vaccines.

"Silence is golden and words are silver", this could be the summary of Thursday's meeting, according to John Plassard (Mirabaud). "Indeed, the ECB President chose not to give too much information that could suggest an upcoming move by the monetary institution. However, it is likely that the June meeting will be more difficult to "negotiate" in the face of the progress of the vaccination campaign and the rise in inflation..."

Friday was important on the macroeconomic release front, with in particular a battery of PMI activity indicators offered by IHS Markit. At the Eurozone level, the industrial PMI rose to 63.4, beating the target, and the services component broke the 50-point barrier, which separates, by construction, a contraction from an expansion in the sector under consideration. Note the excellent performance of the German industrial component, at 66.4. These are the very first estimates for the current month.

Chris Williams, Chief Business Economist at IHS Markit, comments on the latest Flash PMI figures: "The eurozone economy showed reassuring strength in April, despite the tightening of anti-virus measures aimed at stemming new outbreaks, and while it continues to suffer from restrictions in many countries, the eurozone services sector returned to growth during the month as companies adapted to the health constraints and prepared for an imminent economic recovery. Manufacturing expanded very strongly in April. Thawing spending, inventory rebuilding, physical investment and an improved business outlook led to further record increases in output and new orders."

Right now, the pair is trading at $1.2102.

KEY CHART ELEMENTS
No high shadow formed last Monday than the daily candle, and contrary to what happened on 25 February, the bearish channel is losing its validity. We will, especially in view of the increase in volatility after three days of hesitation, tip the upper bound of this ex-corridor into support. A pullback on this level is not excluded. For the time being, the doji stars are lining up in a very thin range of indecision.

MEDIUM-TERM FORECAST
Given 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 EUR/USD is positioned between support at $1.1964 and resistance at $1.2099.