EUR/USD: an about-face that's similar to the US stock market

The EUR/USD exchange rate did the same about-face as the US equity markets, with a complete retracement on Thursday of the gains made the day before at the end of the Fed's Monetary Policy Committee meeting, a meeting which, as a reminder, resulted in a 50 basis point increase in Fed Funds. While future rate hikes of an equivalent magnitude are on the table, J. Powell was keen to point out that higher hikes (75 bps) were not "actively being considered" by the Board members. The tone was less aggressive than the market had feared since the beginning of the week, and allowed - only for a while - an easing in government bond yields. The 10-year Treasuries have since crossed the symbolic 3% mark and are consolidating above it.

A less aggressive but still hawkish tone: "Comments on the labour market, with record levels of job vacancies and the ratio of job openings to unemployed people, have [...] contributed to this 'hawkish' tone," says Vince Manuel, CIO, Indosuez Wealth Management. Employment will be the subject of discussion this Friday at 14:30 (EU time) with the publication of the federal NFP report for April. The consensus is for a further contraction in the unemployment rate to 3.5% of the labour force, 390K new jobs created in the private sector (excluding agriculture), and a monthly increase of 0.4% in average hourly earnings.

To be complete on the statistical front this Friday, the Euro is also under pressure from the very disappointing German industrial production figures (-4.0% in March month-on-month), missing the target completely.

Right now the EUR/USD is trading at $1.0583.

KEY CHART ELEMENTS
While the bearish bias remains in place, the entry point for the pair is no longer optimal since a rebound began yesterday after the Fed's decisions and the press conference. Forex traders will therefore prefer to wait for a much 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 $1.0454 and resistance at $1.0758.