EUR/USD: the Delta variant invites itself to the equation

Things remained bearish on the pair after the sharp break of its 100-day moving average against the dollar in the middle of week 24, after a tightening of tone by the Fed, suggesting an increase in the potential for the dollar to earn.

However, prices stabilised last week, rich in macroeconomic publications, which did not show overheating of the U.S. economy. In particular, after the publication on Thursday and Friday of the final GDP data for the first quarter, confirmed at +6.4%, the PCE (Personal Consumption Expenditures) inflation data down at a monthly rate of +0.5%, government bond yields on both sides of the Atlantic did not get carried away.

The 10-year Treasuries were worth about 1.51 at midday on Monday.

For completeness, the U.S. Consumer Confidence Index (U-Mich) came in at 85.6, a slight decline from expectations. In addition, the monthly US household spending (stable) and income (-1.9%) in May sent mixed signals compared to the respective consensus.

On the statistical agenda this Monday, no major statistical figures to report. Import prices in Germany, published at 08:00, for the month of May, significantly exceeded expectations, at +1.7% in monthly rate. The week will end with a statistical highlight, with the NFP report on US employment, which the Fed is sure to incorporate into its strategic thinking. On Wednesday, we will have a "preview" with the survey of the private human resources firm ADP (Automatic Data Processing).

The main European financial markets began the week on a more than cautious note (-0.60% for the CAC40 and -0.40% for the DAX30 at midday), with investors closely monitoring the spread of the new "Delta" virus variant, in Asia and Oceania. "Regarding the pandemic, although many countries seem to be on the road to recovery, the spread of the Delta variant, discovered in India, is a growing concern in Asia-Pacific," notes Vincent Boy, market analyst for IG France.

Right now, the pair is trading at $1.1925.

KEY CHART ELEMENTS

The $1.2000 level has been ruthlessly broken, as has the 100-day moving average (in orange), which is currently undergoing a downward shift. Friday's black marubozu* is the perfect chart and technical translation of the market psychology. The idea remains negative below the 20-day moving average (in dark blue).

*This type of candle, characterised by a long body, without any shadow, or almost without shadow, shows a continuous mobilization of the side (seller in this case) on the time unit in question.

MEDIUM TERM FORECAST

Based on the key chart factors we have mentioned, our medium-term view is negative on the EUR/USD.