EUR/USD: volatility on the pair is increasing

On the backdrop of the return of risk aversion due to fears of an early heating up of the US economy, in the middle of a post-virus recovery, the euro lost ground in a bout of volatility on Wednesday against the dollar, notably after the publication of inflation figures for April. The greenback regained its stripes as a currency with enhanced "remuneration" potential, with expectations of a normalisation of the Fed's monetary policy. Next month's FOMC meeting will be decisive, if not in terms of actions, then in terms of the language used.

The consumer price index jumped by 0.9% in monthly terms for the month of April and by 0.8% adjusted for volatile elements, according to the Bureau of Labor Statistics. On a yearly basis, the index rose 4.1% for the 12 months ending in April, up from 2.5% for the period ending in March. Similarly, the index excluding food and energy rose by 2.9% over the past 12 months, a larger increase than the 1% rise in the 12 months to March.

An equivalent statistic for the Eurozone will be published next Wednesday (CPI by EuroStat, final data for April), at 11:00 (European time).

As a reminder, the federal report on private usage for the month of April published on Friday highlighted a glaring imbalance between supply and demand. For CM-CIC Market Solutions, "supply is struggling to adjust when demand is soaring under the impetus of a lifting of health constraints", hence the "cold shower" effect. The next step, if this situation persists, is naturally an upward pressure on wages, which will mechanically lead to a pressure on prices. The fear of this spiral is at the heart of the concerns in the market rooms.

Right now, the pair is trading at $1.2079.

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 $1.2210.