EUR/USD: has US inflation reached its peak?

The EUR/USD remains at the top of consolidation, against a background of risk appetite, with the hope of a "transformation of the test" this afternoon, with the much awaited publication of last month's consumer prices. While this indicator is not the Fed's preferred measure of inflation - it prefers PCE prices - there is a clear opportunity to see if the peak in US inflation has indeed been crossed. Find out at 14:30 (EU time).

The CPI (consumer price index, or CPI for English speakers) is expected, for the widest product base and at an annual rate, up 6.4% in December, versus +7% . The confirmation or not of the beginning of a rapid descent, and therefore of an end to an inflationary "peak", would give credit to a little "flexibility" in the monetary policy of the Federal Reserve, whose members more hawks want to remain particularly vigilant, however.

These prices will be analysed within an equation which includes, among other elements, tensions on the employment front, activity indicators, measures to reopen large Chinese urban poles.

"If we combine the ISM and PMI leading indicators, the inflation figures or the sharp slowdown in the real estate sector and the credit market, it is quite possible that the Fed no longer has much room for maneuver. for future rate hikes" says Alex Baradez (IG France). "Its aggressiveness in place since 2022 will likely struggle to get past the first quarter milestone, especially knowing that the rate hikes already on board will continue to produce headwinds for the economy with delayed effect."

At 14:30 (Central EU time), we'll see the level of weekly registrations for US unemployment benefits.

Right now, the pair is trading at $1.0764.

KEY GRAPHIC ELEMENTS
The break of the 20-day moving average (in dark blue), which has served us up to now as a perfectly materialized trailing stop, requires cutting long positions, pending a relevant entry point. . However, no pronounced bearish reversal pattern has been identified. Conversely, only a crossing into a volatility high of $1.075 would validate a bullish extension at this stage. This crossing is effective in value, but without volatility. Moreover, the RSI/price divergence is a concern at this stage.

MEDIUM TERM FORECAST
In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on the EUR/USD.

We will maintain this neutral opinion as long as the EUR/USD parity prices are positioned between support at $1.0435 and resistance at $1.0855.