EUR/USD: a fundamental bearish bias is in place

The euro remains in great difficulty against the dollar today, confirming the early end of its technical rebound against the dollar, in particular due to the disappointment caused by the publication of the final German industrial PMI, which came out at 47.8, against 48.3 in the first estimate. This indicator alone points to an imminent recession in the Eurozone's largest economy.

Phil Smith, Economics Associate Director at S&P Global Market Intelligence, commented coolly on the figures: "The surge in energy prices has halted the slowdown in input cost inflation seen in recent months, causing it to re-accelerate to a three month high in September. If demand continues to fall in the coming month as companies expect, incurring higher costs will inevitably become increasingly difficult, squeezing margins. Indeed, we are already receiving reports of some manufacturers trying to improve cash flow by depleting purchase stocks."

The risks of recession, particularly in the Eurozone, in a tense monetary environment, continue to form the general market matrix, favouring safe havens, in this case the dollar.

As a reminder, on Friday, the Eurozone Consumer Price Index was released as a first estimate for the month of September. Inflation is once again higher than market expectations. It is even in double digits (+10%) for the whole of the monetary union in annual rate, on the broadest basket of products (energy, food, booze and tobacco included). As a reminder, in August, inflation was 9%. Regarding the main components of euro area inflation, energy is expected to have the highest annual rate in September (40.9%, compared to 38.7% in August), followed by food, alcohol & tobacco (11.8%, compared to 10.6% in August), industrial goods excluding energy (5.7%, compared to 5% in August) and services (4.3%, compared to 3.8% in August). This level of inflation is simply a historical record in the Eurozone.

To be followed by the US ISM Manufacturing PMI at 16:00 (central European time).

At midday on the foreign exchange market, the pair is trading at around $0.9768.

KEY CHART ELEMENTS
The Euro's contentious rebound, which developed on 28 and 29 September in a highly volatile environment, is already showing signs of running out of steam as it approaches the 20-day moving average (in dark blue). We prefer to stay out of the spot until the signs of a return to the bearish trend are clearer. This is particularly true of the 50-day moving average (orange), which has been a particularly valuable benchmark since mid-February.
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 $0.9500 and resistance at $0.9890.