EUR/USD: Unfavourable conditions for the single currency

The drop in the EUR/USD, which began on 10 April in the wake of worrying inflation figures in the US, continues with the further rise in geopolitical tensions in the Middle East. Iran launched an attack using drones against Israel on the night of 13 April to 14 April. The international community is trying to coordinate its diplomatic efforts to encourage de-escalation and avoid conflagration in the Middle East.

Forex traders also have to deal with a downward revision in the number of loosening of the monetary tap for the current year, on both sides of the Atlantic. The ECB, however, seems to have greater room for maneuver.

"At the ECB meeting, little information was given on cuts beyond June; this will likely depend on the persistence of inflation. A cut in June still seems likely, despite the strength of inflation of services", say economists at Nomura.

"Lagarde was reassured by the current trajectory of inflation and noted that not all components of inflation need to reach 2%. The Sentix survey was significantly more robust, which points to further improvement in PMI indices as the Euro economy recovers."

In terms of macroeconomics on Friday, there was little to eat apart from preliminary data from the American consumer confidence index (U-Mich), which came out below expectations at 78. On the agenda today, to primarily follow retail sales in the United States as well as the Empire State index at 14:30 (EU time).

Right now, the EUR/USD is trading at $1.0656.

KEY CHART ELEMENTS
The very sharp downward movement of the EUR/USD following the publication of inflationary figures in the United States unlocked our stop at $1.0767. We prefer to stay out of the spot immediately, waiting for a clearer technical signal. The test of an intermediate support zone at $1.0693 could potentially be instructive.

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 $1.0885.