EUR/USD: tension in the US job market

The EUR was still holding its own against the USD yesterday, in a market where risk assets as a whole were proving very resilient, "erasing" the signals of a new banking crisis only a few weeks ago.

"The markets now seem to consider the events of March as a phenomenon without consequence," notes François Rimeu, senior strategist at La Française AM, who sees it as "one of the first consequences of a very strong tightening of financial conditions after a prolonged period of extremely low rates. For the strategist, "the problems in the world of US regional banks do not seem to us to have been completely resolved yet."

The Fed will therefore have to play a balancing act at the next monetary meetings (FOMC) in order not to further brutalise the banking system, while at the same time giving a little "slack" to the monetary string after the publication of PCE (personal consumption expenditures) which confirmed a slowdown in prices.

A slowdown which will have to be completed by concordant signals on both rents and the employment market.

On the first point, Emmanuel Auboyneau, Managing Partner, would like to make the following essential clarification: "The other driving force behind US inflation [in addition to wage inflation] is the continued increase in rents, due in large part to a structural housing shortage. There has been some movement in the construction sector that suggests that the curve will soon be reversed. The stabilisation, and then the fall in rents will be a determining factor in controlling US inflation."

On the latter, the week is rich in benchmarks on this point: new JOLTS offers, ADP survey, Challenger job cuts, unemployment benefit registrations and NFP report as a highlight on Friday. The results of the ADP (Automatic Data Processing) human resources survey are due on Wednesday. The consensus is for 207,500 jobs to be created in the private sector (excluding agriculture) in March.

Right now, the EUR/USD is trading at $1.0898.

KEY CHART ELEMENTS
Around a 50-day moving average (in orange), which is becoming horizontal, the technical messages delivered are progressively dual, without one camp or the other uniting. The opinion is therefore neutral on the leading currency pair pending a concordant set of clear chart and technical clues.

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 $1.0875 and resistance at $1.1045.