EUR/USD: spectacular decrease in eurozone inflation, the euro holds steady

It's THE day of the week dedicated to inflation publications, publications naturally monitored like milk on fire by the community of currency traders. Ahead of today's publication of PCE (personal consumption index) prices, currency traders have just become aware of the first estimates of consumer prices for the month of November in the Eurozone. And surprise, the dynamic of slowing inflation is even greater than expected.

Excluding food, energy, alcohol and tobacco (elements considered volatile), prices increased at an annualised rate of 3.7% in November, compared to a target of 4% and a month of October at 4.1%! A very significant slowdown which should bring a little flexibility in the monetary policy of the ECB, whose President, Christine Lagarde, will speak this afternoon, at the opening of a forum on banking supervision, in Frankfurt.

If this decline favours the main equity markets in Europe this morning (France, Germany, Italy), the EUR/USD, although a barometer of risk appetite, stands out by contracting towards $1.09, due to the new questions raised by these statistics on the timetable for a downward shift in rates. In fact, the "remuneration potential", relative to the dollar, is reduced.

All products combined, inflation is reduced to 2.5% according to this first estimate from EuroStat. The next publication covering all the data for the month of November 2023 is scheduled for 19 December. At the same time, the pan-European statistical office published a stabilization of the unemployment rate at 6.4% of the active population in the Eurozone .

As a reminder, the governor of the American Federal Reserve (Fed), Christopher Waller, expressed confidence on Tuesday in the current level of key rates, judging that they should allow the American economy to slow down sufficiently for inflation to return. towards 2%.

Remember that the Fed will hold its last monetary policy meeting of the year on 12 and 13 December and that its president, Jerome Powell, will speak on Friday.

Right now, the EUR/USD is trading at $1.0927.

KEY GRAPHIC ELEMENTS
After a bullish runaway characterised by the school marubozu candle on 13 November, followed by a very short consolidation and an early bullish extension, a technical adjustment is underway, an adjustment catalyzed by the statistical publication of the morning.

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 $1.0693 and resistance at $1.1012.