EUR/USD: on the lookout for a better entry point

The ECB is concluding a new Governing Council meeting today, which should result in a new increase in key rates, this time by 75 bp to bring them to 1.25%. A turn of screw that the exchange market has already integrated, and which responds to the need to control galloping inflation, even if it means slowing down economic activity, at the very moment when Moscow is using gas exports as a political weapon.

"The ECB's main objective will be to focus monetary tightening, whatever the consequence," says Fred Ducrozet (Pictet WM), who believes that "the ECB will interrupt its rate hike process in the context of a recession that is worsening by the day, even if policy normalisation could resume later in 2023."

Verdict at 14:15 today for the monetary policy decision itself and at 14:30 for the speech of Mrs Lagarde, President of the powerful monetary institution in Frankfurt.

"It is difficult to imagine anything other than a "hawkish" speech by Christine Lagarde during the press conference that will follow the decision on rates," adds Alex Baradez (IG France), for whom the sound of the bell is the same on both sides of the Atlantic: it's necessary to hit hard and in the short term, even if it means going through a recession, because otherwise the long-term costs for the economy will be far too great.

On the macroeconomic front, the slowdown in Chinese export growth, against a backdrop of contracting global demand and zero-covid policies in several megacities, has further dampened the mood. Yesterday, the revision of Q2 growth in the Eurozone to +0.8% quarter-on-quarter allowed the single currency to control its haemorrhage.

At midday on the foreign exchange market, the euro was trading at around $1.0013.

KEY CHART ELEMENTS
In the immediate term, the return to a zone close to perfect parity reinforces the idea of a short-term range between $0.9900 and $1.0090. The closer this range phase takes the spot to its 50-day moving average (in orange, powerfully bearish), the more quality the bearish entry point will gain.

MEDIUM-TERM 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 $0.9900 and resistance at $1.0000.