EUR/USD: appetite for risk seems to have frozen

The euro, one of the benchmarks of risk appetite for fund managers, is consolidating, as are equity markets on both sides of the Atlantic, as signs of a marked economic slowdown in the US multiply. The recent ISM activity indicators, below 50 for industry and a sharp surprise drop for services, are all tangible signs, which will be confirmed or refuted, if necessary, by job creation in the private sector, to be released today.

"We are therefore seeing a clear slowdown in growth forecasts at the end of the quarter, which also corresponds to the start of the stress phase for banks", says Alex Baradez (IG France), who summarises the situation in these terms: "Even if this environment will increasingly limit the aggressiveness of central banks (Fed and ECB should reach their terminal rate during this quarter, the Fed may even have reached it already), the economic slowdown could weigh on equity markets for some time and maintain volatility, before the tone of central banks really eases. To sum up: a temporary frictional phase in the markets, between deteriorating economic data and central banks that are not yet pivoting due to still high inflation levels."

A phase of friction on the equity markets, which could have a correlated impact on both crude oil, whose recent rise on OPEC+'s decision to limit its rise could be traced, and on the EUR/USD, one of the main barometers of risk appetite in the trading rooms.

In the immediate term, still on the closely watched US employment sector, weekly new listings are finally moving away from the 200,000 mark, at 219,000, causing relative relief ahead of the release of the NFP (Non Farm Payrolls) report today.

Right now, the EUR/USD is trading at $1.0922.

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 EURUSD is positioned between support at $1.0875 and resistance at $1.1045.