EUR/USD: A rather timid upward reaction

The Euro, a barometer of risk appetite par excellence, regained some momentum against the Dollar on Thursday, following the publication of a rather reassuring barometer of activity in the Euro Zone, and tone of the Federal Reserve (Fed) at the end of its November FOMC yesterday.

In terms of statistics, the morning was mainly occupied by the publication of the final data for the manufacturing PMI indicators. Data appeared overall at a level slightly higher than the first estimates, published last month. Thus, at the scale of the Eurozone as a whole, the industrial PMI stands at 43.1 compared to a first estimate of 43. Certainly the score is still very far from the 50 point mark. Among the main industrial powers of the Eurozone, Germany is at a 5-month high, Italy at 3 months and France at... 41 months.

Dr. Cyrus de la Rubia, Chief Economist at the Hamburg Commercial Bank, takes a step back from these figures: "the continued strong recession in Germany leaves little doubt about the evolution of the economy in these four countries [Italy, Germany, France and Spain], that of a contraction in the manufacturing industry in the fourth quarter."

Because the main reason for the feeling of relief on the markets, noticeable on the Euro but spectacular on stocks, is in fact to be looked at in terms of the monetary policy of the Fed, whose tone was reassuring yesterday at the end of the FOMC. The markets took note of the status quo, unsurprisingly for Fed Funds, whose remuneration remains between 5.25% and 5.50%. And if stakeholders do not formally exclude, far from it, a final revaluation of key rates, the probability of this option has greatly diminished, within the meaning of the CME's FedWatch tool.

Jack McIntyre, portfolio manager at Brandywine Global, Franklin Templeton's specialist investment manager, believes that "the fourth quarter will be decidedly different from the last three months and we are more confident that inflation will meet the Fed's target. The only question is timing. However, if the Fed continues to tighten, it will cause a recession. Investors should consider buying Treasuries to guard against a Fed policy error."

Right now, the EUR/USD is trading at $1.0631.

KEY GRAPHIC ELEMENTS

The framework remains bearish, as long as the 20-day moving average (in dark blue) gravitates below its 50-day counterpart (in orange). In the short term, we are in a phase of congestion under the long moving average, the structure of which does not suggest a clear rebound.

MEDIUM TERM FORECAST

Considering the key graphical factors that we have mentioned, our opinion is neutral in the medium term on the EUR/USD.

We will maintain this neutral opinion as long as EUR/USD prices are positioned between support at $1.0550 and resistance at $1.0693.