EUR/USD: a test of the moving average is underway

After accelerating during J Powell's speech yesterday at an event organized by the Economic Club of Washington, D.C., 10-year Treasuries, i.e. by metonymy the yields of 10-year US government bonds, were consolidating this morning, as was the euro, which stopped its hemorrhaging against the dollar in the immediate vicinity of the 50-day moving average (in orange).

This was a clear opportunity to shed some light after last week's tepid FOMC meeting. The Fed boss finally did not harden his tone, despite the very important tensions on employment. The Fed President referred to the 518,000 private sector jobs created in January, while pointing to the lack of momentum on the wage front.

"[Central banks] still don't plan to cut rates during the year, which the markets don't want to admit," according to Cholet Dupont strategist Vincent Guenzi's reading. "Central bankers fear that after a period of decline, inflation will stabilise at too high a level, hence their caution while the markets themselves see the risks of a pronounced slowdown in growth."

To be followed in priority on the macroeconomic agenda this Wednesday across the Atlantic: wholesale inventories at 16:00 and oil stocks at 16:30 (European time).

Right now, the pair is trading at $1.0726.

KEY CHART ELEMENTS

The bullish bias is not threatened at this stage. Simply, the spot is falling back, towards its long moving average, with no tangible sign of a buying entry point. Neutral opinion retained. Only a sharp break of the 50-day moving average, with confirmation at the end of the week, would send a consistent negative message.

MEDIUM-TERM FORECAST

Based on 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 $1.1045.