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#1 03-05-2021 11:17:51

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: the 100-day moving average is flattening

EUR/USD: the 100-day moving average is flattening


On Friday, the lower risk appetite in the financial markets was not only seen in the equity markets on both sides of the Atlantic, but also in the foreign exchange market, where the Euro fell below its 10-day moving average (in orange), a curve that currently remains at zero slope, against a backdrop of 10-year Treasury yields remaining near 1.63%.

The statistics published on Friday support the idea of a tonic economic recovery, but out of sync on both sides of the Atlantic.

France clearly outperformed Germany, with growth of 0.3%, while the economy across the Rhine contracted by 1.6% with more widespread containment. In other macroeconomic news, Friday morning saw the release of the Eurozone's flagship consumer price index, at +1.5% for the broadest product base, well within target, as well as preliminary GDP data (-0.5% quarter-on-quarter), and a surprise drop in the unemployment rate to 7.9% of the labour force. Household income and spending did not provide any major surprises for the month of March. On the other hand, the Chicago PMI rose sharply, to 71.9, at the highest level in 21 years.

The dollar will have taken a breather after passing the "test" with flying colours throughout the past week, with GAFA quarterly results being very good overall.

This week, traders will gradually turn their attention to the essential benchmarks concerning US usage, the dynamics of which is an essential indicator for the Fed in the construction of its monetary policy for the months to come. The main statistical events on the agenda: the survey by the private firm ADP on Wednesday, weekly unemployment benefit registrations on Thursday and, as a highlight, the federal NFP (Non Farm Payroll) report on US private sector usage for April.

On Monday, traders were treated to final industrial PMI data with few surprises. The (final) industrial component for the month of April in the monetary union as a whole came in at 63.0, very slightly below target, but at the highest level in our history (since January 2005).

Chris Williams, Chief Business Economist at IHS Markit, comments on the latest survey figures: "Growth in output and new orders has been at unprecedented rates, with the reopening of economies after the virus confinements and an improved business outlook for the year ahead being accompanied by a strong increase in demand. However, unprecedented strains on supply chains have led to a record build-up of backlogs of work in eurozone manufacturing companies".

Right now, the pair is trading at $1.2053.

KEY CHART ELEMENTS
The crossing of the upper limit of a former bearish channel is now fully validated, by the increase in volatility in particular on 23 April, and by the consecutive crossing, in the wake, without any form of hesitation, of the 100-day moving average (in orange). However, a neutral opinion is proposed in the absence of a quality entry point. The marubozu drawn on Friday can be used as a framework to define a future lateralization phase.

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 EURUSD is positioned between support at $1.1964 and resistance at $1.2100.

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