EUR/USD: parity has been avoided...for now

The USD should continue to appreciate as the US central bank is much more aggressive than the ECB in fighting inflation. It is true that the economies of the two continents are not comparable and that the prospect of a recession in the US is not really frightening because it could be short-lived. In any case, "horse remedies" are not the least effective. In Europe, there is the added difficulty of managing large differences in rates. Moreover, a recession could prove to be really diplomatic.

Clearly, there are many arguments in favour of a deeper depreciation of the euro. However, parity has proven to be an inescapable psychological factor and strong enough to counter rational economic explanations.

Given this state of affairs, and as long as it lasts, we believe that we should avoid staying in the seller's camp, but not buy recklessly either.

For the time being, traders are looking to move away from parity. Right now the pair is trading at and at midday on the foreign exchange market, the Euro was trading against the Dollar at around $1.0220.

KEY CHART ELEMENTS

Between a lower than expected "remuneration" potential and the risk of recession, particularly in view of the weight of German industry, the Euro has seen its rebound, which has been underway since perfect parity was reached, dry up, and the entry into a rebalancing phase, not without volatility, is the chosen option. Neutral opinion issued, avoiding taking positions in the immediate future.

FORECAST

Based on 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 $1.0000 and resistance at $1.0274.