EUR/USD: A busy week for traders with the PMI, ZEW, minutes and PCE

Market psychology remained unchanged on the EUR/USD at the beginning of the week, with on the one hand a Euro which was resisting profit taking on a background of risk appetite barely dented by the rise in rate; and a Dollar which was pushing, for its part, since the interventions of various Fed executives, in favor of maintaining a relatively firm monetary policy.

"Proponents of the 'persistent inflation' scenario cited the strength of the labor market, easing financial conditions and the V-shaped rebound in Chinese economic growth. To support the thesis of the persistence of inflation, the other set of data to be released was the January Purchase Price Indices (PPIs), which together are considered a leading indicator of future consumer prices." reads in a weekly market commentary from Muzinich & Co.

As a reminder on Thursday, the producer price indices for the month of January in the United States, well above expectations (+0.6%), as are the weekly registrations for unemployment benefits, below 195,000 new units , have once again shown, as leading inflation indicators, the strains on the economic machine. A new reminder for the Fed that maintaining a firm monetary policy throughout 2023 will be essential.

Since then, traders haven't had any sharp US statistical releases to chew on, especially as Wall Street remained closed yesterday due to a holiday. Fed Minutes and then PCE prices will be hot spots on the calendar on Wednesday and Friday, respectively. To be followed at 15:45 (European time) the American services and industrial PMIs in advanced data for January, as well as sales of existing homes at 16:00.

In the immediate future on the European side, a battery of PMIs has just been published, below expectations for industry and above for services, for synthetic data for the monetary union. The ZEW index of confidence in the German economy, at 28, largely exceeded the target. ZEW chairman Achim Wambach made the following comments alongside the raw survey data: "A large proportion of survey participants expect the economic situation to improve in the next 5 months. However, the current situation is still rated relatively unfavourable. As in the previous month, the rise in expectations can be attributed to higher earnings expectations in the energy and export sectors as well as in the consumption-related economy. Expectations for long-term interest rates are also rising and the banking sector indicator has reached its highest level since 2004."

Right now, the EUR/USD is trading at $1.0659.

KEY GRAPHIC ELEMENTS
After gradually weakening from February 6 to 14, the 50-day moving average (in orange) ended up giving way. This underlying trend line is now under threat from its 20-day counterpart (in dark blue). The sell signal would then gain in intensity if necessary. The crossings of these two remarkable moving averages have been providing excellent positioning and trade monitoring signals for many months.

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

We will keep this neutral opinion as long as the EUR/USD parity prices are positioned between the support at $1.0645 and the resistance at $1.1045.