EUR/USD: Minutes which announce things to come

The Euro maintained a bearish bias against the dollar, under the combined effect of a loss of risk appetite, favorable to the single currency, and a rise in US government bond yields following the Minutes, favorable to the greenback.

Published Wednesday evening, "the minutes", that is to say the minutes of the last monetary policy meeting of the Fed, revealed a concern on the part of the members of the American central bank at the level of the 'inflation. These Minutes have therefore campaigned for the maintenance, for many more months, of a firm monetary policy by maintaining rates at a high level, on a plateau.

"Indeed, the monetary institution's report indicates that 'most participants continued to perceive significant upside risks to inflation, which could necessitate a further tightening of monetary policy'", notes J. Plassard of Mirabaud.

10-year Treasuries were now flirting with 4.30%, the highest since November 2007.

The market dissected the few statistics of the day, Wednesday, with in particular industrial production in the United States for the month of July which increased by 1% over one month, thus exceeding expectations. “With the resilience of industrial activity in Europe fading, with growth in China virtually at a standstill and domestic demand for consumer goods likely to weaken due to the further rise in interest rates, the groups American manufacturers are likely to experience difficulties in the second half of this year”, nevertheless judges Capital Economics.

Published yesterday, monthly housing starts and building permits came out very close to expectations.

On this side of the Atlantic, EuroStat published some interesting benchmarks yesterday morning, in particular the volume of industrial production in the Euro Zone which significantly beat expectations (+0.6%) in June, and all first estimates of GDP (+0.4% in Q2 compared to the previous quarter). Note, however, after Germany, the entry of the Netherlands into recession.

Right now, the pair is trading at $1.0872. A resistance to put in relation with the European statistical figures published on Wednesday, and the balance of the trade balance of June, published Thursday morning. EuroStat announces that the euro zone recorded a surplus of 23 billion euros in its trade in goods with the rest of the world in June 2023, compared to a deficit of 27 billion euros in June 2022.

KEY GRAPHIC ELEMENTS

The near total retracement of July's gains does not militate at this stage for a continuation of the advance of the currency pair, without formally ruling it out. This retracement, by its magnitude, weakens the bullish message then delivered over a good part of July. The outcome of the ongoing test of the 50-day moving average (in orange) will be decisive. Immediate neutral opinion. Forex traders will therefore avoid taking a position in the next few hours on the currency pair, waiting for a directional entry. The bearish message would nevertheless take shape in the event of an imminent break in the 50-day moving average by its 20-day counterpart (in dark blue) at a significant angle.

MEDIUM TERM FORECAST

In view of the key graphic factors that we have 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 $1.0854 and the resistance at $1.1100.