EUR/USD: a period of calm ahead of big statistic report releases

The EUR/USD has been in a lull, ahead of Thursday's highly anticipated release of the US consumer price indexes. The currency pair will have benefited last week from a slightly more hawkish tone from Christine Lagarde, with a final gain of more than 300 pips over the whole week, gains largely made at the end of the ECB Governing Council.

Under pressure after the publication on Wednesday of an unprecedented surge in inflation in the euro zone (+5% over one year in December, +2.2% adjusted for energy, food, alcohol and tobacco), Christine Lagarde acknowledged that the rise in consumer prices was stronger than expected, also admitting that the risks were on the rise, while repeating that she expected a slowdown by the end of the year. The ECB President also assured that the ECB Governing Council would not make any hasty decisions on monetary policy but did not reaffirm that a rate hike this year was "very unlikely", as she had said at the last meeting.

"The ECB went a step further by saying that inflation was higher than expected and that it could stay higher than expected, at least for several months," said Vincent Manuel, investment director at Indosuez Wealth Management. "What has also changed," he continues, "is the perception of the labour market, which should at some point generate upward pressure on the level of inflation, but to a lesser extent than in the US or the UK. With unemployment at a record high of 6.9% and the participation rate back to pre-pandemic levels, the labour market is perceived to be very strong and could lead to upward pressure on wages, which the ECB does not yet see. This can be interpreted as a critical point that will impact future ECB policy."

On the statistical front yesterday, the Sentix investor confidence index for the Eurozone rose more than expected to 16.7 points.

The US trade balance is due at 14:30. Earlier at 12:00, the NFIB indicator for US small businesses will be published. Note that the French trade deficit for the month of December missed the target, widening further to -11.29 billion euros.

Right now, the EUR/USD pair is trading at $1.1430.

KEY CHART ELEMENTS
For the first time since 16 June (when it was on a sharp break), the spot has touched its 100-day moving average (in orange), which is still a very significant downtrend line. Forex traders will continue to adopt a patient stance, waiting for a satisfactory entry point, as the consolidation that began at the end of November takes a very broad form.

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 $1.1360 and resistance at $1.1530.