EUR/USD: conditions aren't really favourable for a genuine rebound

The EUR/USD exchange rate did not develop a sustained protest rebound last week after the FOMC's less aggressive than expected tone. A less aggressive tone but hawkish nonetheless: "Comments on the job 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 at Indosuez Wealth Management.

The report on employment published on Friday (NFP report) will have shown signals of relative calm. In detail, it is a relative relief that emerges on this point, with an unemployment rate that remains almost stable at 3.5% of the active population (3.6% expected) and an increase in average hourly wages contained at +0.25%. Finally, the US economy created 427,500 jobs in the private sector (excluding agriculture).

Forex traders will naturally continue to monitor two major events, whose influence on inflation is intense: the war in Ukraine on the one hand, and the confinements in China on the other, causing a brutal brake on the production capacities of the "world factory". After Shanghai, it was the capital, Beijing, which was confronted with an epidemic wave, immediately followed by drastic containment measures, in application of the "Zero Covid" policy decided by the authorities.

In the meantime, currency traders have just taken note of the Sentix investor confidence index for the Eurozone, which continued its contraction, sinking further into negative territory, at -22.5, missing expectations. As a reminder, the Sentix Economic Index is calculated monthly from a survey of over 4,500 private and institutional investors on their assessment of the economic situation and their economic expectations for the next 6 months.

Right now, the pair is trading at $1.0568.

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.