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#1 01-12-2022 14:54:33

johnedward
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From: Paris - France
Registered: 21-12-2009
Posts: 3421
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EUR/USD: the dollar appears to be losing its appeal

EUR/USD: the dollar appears to be losing its appeal


The dollar will have lost ground against the euro since Wednesday, with comments deemed accommodative by Powell. The Fed Chairman, who was presenting his economic outlook to an audience at the Brooking Institution (Washington DC), made it clear that the path to a slower pace of Fed Funds increases was on track, after some signs of easing on the inflation front. In the wake of the speech, the odds of a 50bp hike in the main policy rate, which had already been in the majority since the Minutes, took off, virtually wiping out the scenario of a 75bp hike for the next term.

This scenario was corroborated by the publication of the PCE (Personal Consumption Expenditures) consumer price index, the Fed's preferred measure of inflation, which showed a monthly increase of 0.2% (against a consensus of 0.3%). It is now rather serenely, on the employment side, that traders will turn their attention, with the NFP (Non Farm Payrolls) report later today, the traditional federal survey on the health of employment in the private sector (excluding agriculture). A slight lull in labour market tensions was noted Wednesday with the ADP survey, which showed "only" 126,000 new jobs created in the private sector (excluding agriculture). No big surprise, however, with regard to weekly unemployment benefit registrations, which have just come out at 226,000 new units, still at a meagre level.

Right now, the EUR/USD is trading at $1.0523.

KEY CHART ELEMENTS
Volatility remains high on the spot market, which is tracing a broad consolidation, the structure of which remains to be defined, around $1.0300. A continuation of these nervous oscillations is the preferred option, a scenario that is not very attractive for taking positions. We prefer to stay out of the spot for the time being. The limits of the flag are clearly identified, between $1.0240 and $1.05.

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 $1.0238 and resistance at $1.0484.

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