EUR/USD: the euro's flirting with $1.09

The market psychology remained unchanged in the EUR/USD, with the single currency continuing to hold its own against the dollar, in a context where risk appetite was only slightly countered by the disappointment of the downward revision of the growth of Microsoft's questionable cloud computing services division. The latest European statistics continue to support a soft landing for the three main economic powers of the Eurozone (Germany, France, Italy), while traders are already looking ahead to major US events: the release of PCE prices tomorrow and the outcome of the first FOMC meeting of the year on 1 February.

"The Fed has a bandoned the 75bp hikes, after 4 successive ones and could even, according to market player expectations, increase by only 25bp at the 1 February FOMC meeting", notes Vince Bay (IG France).

In terms of statistics, the IFO business climate index in Germany came out perfectly on target, at 90.1, up slightly. "In industry, the index continued its upward trajectory. Companies assessed their current situation as better. Their expectations for the next six months were also clearly brighter. Order volumes are falling but remain at a high level. Production should increase in the coming months," the institute says.

Earlier in the week, the much-anticipated first estimates of the PMI indicators confirmed this framework. The German industrial component, with its traditionally strong impact, even rose above the 50-point mark, which separates a contraction from an expansion in the sector in question. The services component for the Eurozone as a whole also passed over the 50 mark.

On the macroeconomic agenda this Thursday, across the US, the first estimates of GDP in Q4, durable goods orders, weekly unemployment benefit registrations, the goods trade balance and wholesale inventories are to be followed at 14:30.

Right now, the pair is trading at $1.0894.

KEY CHART ELEMENTS
In the absence of validation of a bottom-up pattern, a continuation of neutral, thin range oscillations near the 20-day moving average (in dark blue) is expected. The very structure of the current consolidation is evidence of the Euro's advantage at the start of 2023.

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 $1.0645 and resistance at $1.1190.