EUR/USD: the decline of US interest rates will be slow

The EUR/USD continues its consolidation movement in a pennant, above an oblique crossed energetically on May 15 in a foreign exchange market relieved by the American inflation figures.

As a reminder, excluding food and energy, these consumer prices increased in the US in April by 0.3%, moderately therefore, and in line with the target. Over one year, these prices increased by 3.5%, compared to 3.7% the previous month.

However, two Fed executives, Michael Barr, vice-president of the Federal Reserve in charge of banking regulation, and Philip Jefferson, another vice-president of the Fed, insisted that a restrictive monetary policy should remain the norm. a long time to go for a truly effective fight against inflation. A normalisation of the job market, still under strong tension, is necessary.

In the process, 10-year Treasuries regained a few points towards 4.42, after falling to 4.31 on 05/15 following the publication of the CPI.

"After short-term observations, we can however consider that the progress made in recent months has been made with difficulty. In 8 months, underlying inflation (CPI core) has only slowed by 0.5%. And this echoes the numerous declarations of members of the Fed, including those of its president, highlighting the lack of significant progress in recent months", Alex Baradez (IG France) said after this key publication.

"We could therefore begin to think that the American economy needs to slow down a little more so that the Fed is convinced that inflation is indeed returning, and in a sustainable manner, towards the 2% objective, and thus proceeds to its first rate cut."

There was also talk of inflation on Friday 17 May, on this side of the Atlantic. Forex traders have digested the final consumer price data in April, for the Eurozone this time, which EuroStat, the statistical office of the European Union, has just published. No deviation to report compared to the first estimates. Excluding food, energy, alcohol and tobacco, prices increased by 2.6% annually. Figures which are stable compared to March.

Not much to get your teeth into this Tuesday in terms of statistics, apart from the positive monthly balance of trade in the Eurozone (+17.2 billion euros, below expectations). We will have to wait until tomorrow for the calendar to thicken somewhat, with sales of old homes across the Atlantic, but especially Thursday with PMI activity indicators in the Eurozne and the closely monitored weekly registrations for unemployment benefits.

The Fed Minutes, the traditional report of the last monetary policy meeting (FOMC) will be published tomorrow.

Right now, the EUR/USD is trading at $1.0854.

KEY CHART ELEMENTS
On large-scale marubozu, the currency pair shattered the technical resistance level constituted by the bearish oblique drawn in black. A recovery is underway, which may ultimately result in a pullback. The conditions in terms of entry point are not met to immediately build a position on the currency pair.

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 $1.0758 and resistance at $1.0885.