EUR/USD: has US inflation hit a peak?

The euro continued to suffer against the dollar, at around $1.0560, in a thin range since the end of April, in the absence of risk appetite in the financial markets. Forex traders will turn their attention tomorrow to the US CPI figures, which "will be a major indicator for the markets. It will be a major indicator for the markets. And it will have a special character because, unlike in previous months, the consensus is that prices will increase less strongly this time", according to Alex Baradez (IG France). The challenge is to locate the inflation peak in time.

"The peak in US inflation does not mean a rapid fall in prices, but the markets could start to change their one-way view and consider a more "consolidating" stage. And this could start to be felt with the beginning of an inflection of appetite for the dollar benefiting the euro."

On the broadest basket of products, including food and energy, last month the US Bureau of Labour Statistics published an annualised price increase of +8.6%.

Yesterday traders took note of the Sentix Eurozone Investor Confidence Index, which continued to contract, 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 4,900 private and institutional investors on their assessment of the economic situation and their economic expectations for the next 6 months.

On Tuesday, Germany's ZEW came out above expectations, although in negative territory at -34. Professor Achim Wambach, President of the ZEW, commented: "The ZEW Economic Sentiment Indicator rose moderately this month but still remains at a relatively low level. Compared to last month, the outlook for the economic situation in Germany is therefore somewhat less pessimistic. Experts still assume that it will continue to deteriorate, but at a slower pace than previously expected. The severe restrictions in China to combat new virus infections are causing a sharp decline in the balance sheet for the current economic situation in China. This is a heavy weight for the future development of the German economy. With regard to the ECB's monetary policy stance, a large majority of experts expect interest rates to rise in the next six months. As a consequence, they expect inflation rates to fall from their current high level."

Right now, the pair is trading at $1.0534.

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 EURUSD is positioned between support at $1.0454 and resistance at $1.0758.