EUR/USD: US jobs are barely digested, inflation now under the microscope

The question for traders is not whether Friday's NFP US employment report is disappointing per se, but how it may or may not be a force influencing the Fed's monetary policy for the months ahead.

Regarding the federal report itself: While the (admittedly very greedy) consensus was close to one million jobs created, the US economy actually created only 267,000 private sector jobs (excluding agriculture). The unemployment rate, expected to fall to 5.7% of the active population, actually rose slightly to 6.0%. Finally, on the other hand, the dynamics of hourly wages (+0.6% in monthly terms) clearly exceeded expectations.

The reading of the report is twofold. On the one hand, it is disappointing, but it shows that the US economy, at least as seen through the prism of usage, is not overheating, which is consistent with the maintenance of accommodative credit conditions for a long time. Unless it is a sign of a severe labour shortage...

"The publication of much lower than expected US usage figures last month at least temporarily dispels inflationary fears and the prospect of a tightening of the Fed's monetary policy," reads a morning note from Aurel BCG.

For CM-CIC Market Solutions, "supply is struggling to adjust as demand soars under the impetus of a lifting of health constraints", hence the "cold shower" effect.

Inflation figures this week (Thursday 14:30 European time) will shed further light on this, and fuel speculation about the timing of the Fed's monetary normalisation. This is clearly the statistical highlight of the week.

Right now, the pair is trading at $1.2169.

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). The black marubozu drawn on 30 April was followed by the white marubozu of equivalent magnitude, testifying to the very short-term nervousness of the currency pair. The formation of a small consolidation flag is the preferred option.

MEDIUM TERM FORECAST
Based on 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 $1.2100 and resistance at $1.2210.