EUR/USD: a busy week up ahead (especially with the Governing Council)

The euro was showing a very unappealing candle (still in the process of being drawn) against the dollar this Monday at midday, in the immediate vicinity of the 20-day moving average, at the dawn of a week that will be very rich and dense in terms of statistics, with in particular the US consumer confidence index (Conference Board) on Tuesday, durable goods orders in the United States on Wednesday, the ECB's monetary policy decision on Thursday, and the Consumer Price Index (CPI) in the United States, one of the measures of predilection of inflation for the Fed.

In the immediate term, on Monday, the disappointment after the publication of the IFO business index in Germany is weighing on the single currency. The index fell below expectations to 97.6. The Institute provided the following insights:

In the manufacturing sector, the business climate index fell again. Companies are somewhat less satisfied with their current activities. Expectations are also becoming more clouded. Supply bottlenecks led to a drop in capacity utilisation by 2.0 percentage points to 84.6%. In the services sector, the business climate deteriorated again after a recovery in the previous month. Companies are clearly less optimistic about the months ahead. However, their assessments of the current business situation have improved slightly.

On the ECB, which will conclude a meeting of its Governing Council on Thursday, in their latest Pictet Wealth Management Flash Note "Future of QE", Frederic Ducrozet, strategist, says that "ECB purchases under the QEAP will be reduced to €50 billion per month in the first quarter of 2022 before being fully phased out in March 2022. He expects the ECB to double its regular asset purchase programme to €40 billion per month from April 2002, but its commitment to unlimited QE is likely to weaken. Frederik expects the ECB to revise the pace of asset purchases every quarter and reduce them to €20bn per month by 2023."

Right now, the pair is trading at $1.1603.

KEY CHART ELEMENTS
With the 20-day moving average (in dark blue) having been breached again, in a high volatility level, we are momentarily unlocking our bearish targets ($1.1486 and $1.1360), and will wait for a break below this dynamic technical level to work the spot lower again.

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 $1.1532 and resistance at $1.1674.