EUR/USD: traders are already thinking about Friday's consumption numbers

The Euro remained compressed below its 20-day moving average (in dark blue) against the dollar, while high volatility continued to dominate equity and commodity markets as markets hypersensitively tried to gauge at this stage the potential impacts of the emergence of a new variant of the coronavirus on the economic recovery and the Fed and ECB monetary normalisation process.

"The high rate of hospitalisation among children and its high transmissibility suggest that the Omicron variant may be able to resist current vaccines, which is worrying to say the least. We are awaiting further clinical data, which will be essential to determine the extent of any new confinements," says César Perez Ruiz, Head of Investments and CIO at Pictet Wealth Management.

In any case, the discovery of the Omicron variant of Covid 19 is "[...] a warning that, at least as much as inflation, the virus remains a market determinant that should be approached not as a hypothesis, but as a certainty with an unknown timeframe," summarises Alexandre Hezez, strategist at the Richelieu Group.

In this context, the Fed will have to deal with a new unknown in the equation, and this in the context of inflation that is no longer transitory. On Friday, the various consumer price indices in the United States will shed additional light on the matter and will fuel the reflection on the pace of tightening of the monetary tap.

On the statistical front, the momentum of German industrial orders for October completely missed expectations, falling by almost 7% month-on-month. In addition, the Sentix investor confidence index for the Eurozone fell sharply to 13.5, below expectations.

In the immediate term, it is the ZEW (German economic confidence index from the Zentrum fur Europaische Wirtschaftsforschung) that is helping the single currency to keep its head above water. The indicator came out in the immediate vicinity of 30 points, contracting very slightly compared to the consensus, and thus beating the target by a wide margin.

However, ZEW President Professor Achim Wambach made the following cautious comments: "The German economy is suffering significantly from the latest developments in the COVID-19 pandemic. Persistent bottlenecks are weighing on production and retail trade. The decline in economic expectations shows that hopes for much stronger growth in the next six months are fading. In particular, profit expectations for export-oriented and consumer-related industries are being assessed more negatively.

Right now, the pair is trading at $1.1248.

KEY CHART ELEMENTS
The shorting trend was strongly reinforced by the break of a technical zone at 1.1530, on marubozu on November 10. This was a major event, which resulted in a massive release of selling energy. The short term is aligned with the bearish medium term for the Euro/Dollar currency pair, but the entry point is no longer optimal, as the likelihood of a contentious rebound forming at this stage is increasing. Traders will prefer to stay out of the spot market for the time being while waiting for a suitable entry point.

MEDIUM TERM FORECAST
Given 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 1.1150 USD and resistance at 1.1360 USD.