EUR/USD: Are US jobs the key variable?

The euro, one of the most reliable reference barometers for measuring risk appetite in the financial markets, maintained a bearish bias against the dollar with the approach of ECB Governors Council and Fed FOMC meetings on June 14 and 15. Forex traders await clarification from major central bankers even as the equation becomes more complex. Inflation persists on both sides of the Atlantic, AND signs of an economic slowdown are multiplying (German industrial production, American ISM Services).

On the ECB side, the message is maintained at a high level of firmness. According to comments reported by the Reuters agency, the central banker felt that she currently saw no "tangible proof" that underlying inflation (excluding energy and food prices) had reached "a peak". Pricing pressures also remain "high", she added, speaking at a hearing before MEPs. Clearly firm remarks, which set the tone before the Board of Governors.

On the Fed side, "The markets are rallying more and more to the idea that the Fed will not pass a rate hike in June before proceeding to a new increase in July", notes Deutsche Bank. With an eye that will remain focused on prices - the CPIs will be communicated the day before the monetary verdict - and on employment, whose degrees of tension remain high. "Will employment have to turn around for inflation to be defeated?" ask the strategists of ECOFI in a note, for whom "the dynamics of employment in the United States is THE key variable to follow from now on..."

"For the moment the vacancy rate is falling, without the unemployment rate rising sharply. Companies are curbing their hiring intentions but are not laying off massively. In addition, it is tempting to think that with so much difficulty in to recruit, reinforced by the aging of the population, employers are more reluctant to part with their employees. It is nevertheless clear that new hires are spreading less and less to all sectors, and that a return to Some form of balance seems to be settling in. The timing of the first month of net job destruction will no doubt be key for the Fed and investors, if it ever materialises."

As a reminder, the content of the report for the month of May published on Friday is confusing, with a significant increase in the unemployment rate from 3.5% to 3.8% of the active population, proof of the "efficiency", with the quotation marks which are essential in the restrictive policy of the Fed. This brake is finally palpable on employment, the dynamics of rising wages remaining stable moreover... But - because there is a but - the American economy would have created nearly 340,000 jobs in the sector private (non-agricultural), exploding the target. What give new nodes to the brain of the Fed, whose obsession is the runaway spiral prices wages, hitherto avoided.

Today's economic news release: American oil stocks at 16:30 Central European time.

Right now the EUR/USD is trading at $1.0690.

KEY GRAPHIC ELEMENTS

The 20-day moving average (in dark blue) has just cut downwards the trajectory of its 50-day counterpart (in orange): the bearish message emerges strengthened. Note the importance of the crossing angle of these trend curves. Next intermediate threshold identified: $1.0550, a breach of which would have consequences in terms of occasional downward acceleration. The short position will be held with discipline as long as the 20-day moving average gravitates below its 50-day counterpart (in orange).

MEDIUM TERM FORECAST

In view of the key graphic factors that we have mentioned, our opinion is negative in the medium term on the EUR/USD parity.

Our entry point is at $1.069 USD. The price target of our bearish scenario is at $1.0436. To preserve the invested capital, we advise you to position a protective stop.