EUR/USD: a wrapping around the parity level

The EUR/USD remained close to perfect parity as the final results of the US midterm elections were being finalised. First lessons: the Republican tidal wave envisaged for a time in the House of Representatives will not take place. In the Senate, the results at this stage show a very balanced balance of power.

Another very important driver for the Euro/Dollar currency pair is the Consumer Price Index which will be released today (14:30 European time). On an annualised basis, and for the broadest basket of products (including food and energy), prices are expected to rise by 8%, compared to 8.1% last month. "US inflation figures released this week will be closely watched, after the latest employment data confirmed the ongoing labour shortage. However, this data should not cause the Fed to deviate from its extreme tightening policy," note strategists at BlackRock Investment Institute, in the conclusions of their "New Market Regime" forum.

The energy of the pullback was maintained at the beginning of the week by two publications which came out significantly above expectations: German industrial production (+0.7% in September) and the Sentix index of investor confidence in the Euro zone which at -31, although in negative territory, makes a nice recovery. The firm specialising in behavioural finance provided the following interpretation: "The overall index rose by 7.5 points to -31, which is still not a signal of a trend reversal. But the rise in the situation and expectation values shows how sensitively investors react in their economic expectations to signals from the energy market. For this is the cause of the promising changes. October showed warmer than usual temperatures and this means that gas storage facilities in Germany, for example, are full to the brim, more than expected for November, gas prices on the spot market have collapsed and fears of a catastrophic gas shortage are fading."

Right now, the pair is trading at $1.0048.

KEY CHART ELEMENTS
In a volatile environment, the currency pair has successively traced two marubozus in daily data, of equal magnitude, and comparable level, around the perfect parity, which continues to constitute a pivot level for the time being. The main issue at the moment is positioning relative to the 50-day moving average (in orange). Knowing that the last green body dates from the 26/10 "session", and that this trend line is in the process of reaffirming its negative slope, we will talk about a false exit and reintegration. We are now witnessing a second pullback on the perfect parity. The bearish message is therefore reinforced.

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 $0.9890 and resistance at $1.0175.