EUR/USD: is a pullback needed to confirm the current direction?

The technical fact of last week is clear: it is the break, without bluntness, in conditions of significant volatility, of the $1.1670 zone, with the accumulation of risk (shutdown, Evergrande, energy crisis in China), against the background of heating of the American long rates. A "saloon door" effect that heavily penalised the currency pair last week. The latter is attempting a timid reaction of protest, which may develop further. At this stage, however, let us remember an important element: there is no need to draw a pullback on the aforementioned zone to "confirm" the market psychology in place.

In terms of statistics on Friday, traders took note of the PMI manufacturing activity indicator in final data for September, at 58.7 points, very close to the target in synthetic data for the whole of the Eurozone. But it was above all the inflation figures (one of the main measures in any case) that were the statistical focal point on Friday: the consumer price index in the monetary union, in the broadest base, came out at an annualised rate of +3.3%, very slightly above expectations (+3.2%). In the US, targets were beaten for the ISM manufacturing index and consumer confidence (U-Mich).

On Monday, the Sentix index of investor confidence in the Eurozone came out clearly lower than the consensus forecast. The Institute summarises: "Economic indicators in the Eurozone continue to lose momentum in October: at 17.0 points, the overall index falls for the third consecutive time and expectations drop for the fifth time in a row to just 7 points. For Germany, we get the first feedback after the Bundestag elections: the current assessment also falls by 5 points, while the expectations component resists the overall loss of momentum and even manages to rise by 2.8 points."

US employment will also be under scrutiny this week: ADP survey on Wednesday, weekly jobless claims on Thursday, and above all the federal NFP report on Friday.

Right now, the pair is trading at $1.1598.

KEY CHART ELEMENTS
The bearish idea, reinforced by the break of $1.1675, remains fully valid. However, traders will prefer to postpone their positions / reinforcements, waiting for a more interesting entry point.

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 $1.1486 and resistance at $1.1675.