EUR/USD: US jobs, EU IPCs, and French politics on the menu

The EUR/USD did not confirm on Tuesday the good conditions seen the day before in the wake of the results of the French legislative elections. Results which have, at first glance, removed the danger of an absolute majority of parties whose programs constitute a risk for already shaky public finances.

As a reminder, the RN (+ the Republicans who allied themselves with it) obtained 33.24% of the votes cast, ahead of the New Popular Front communists (NFP), credited with 27.03%, and the presidential list (19.65%).

"Even if the probability of an absolute majority of the National Rally is not completely zero at this stage, the first declarations of the different political groups on possible withdrawals and therefore the opening of negotiations with a view to the second round will make the scenario of the difficult absolute majority", deciphers Alex Baradez (IG France).

A period of negotiations therefore begins, which will materialize at the level of the continuation of the vote, by the withdrawal of numerous candidates, in the case of "triangular", or "quadrangular", that is to say when 3 or 4 candidates are in "ballot".

"These negotiations will also probably make it possible to smooth over the most radical political proposals formulated during the campaign by certain political groups, these radical measures which are typically those which frighten the markets."

Nomura analysts believe that "the French elections could obscure the inflation narrative at the upcoming ECB week conference in Sintra. The ECB will try to bring back the inflation narrative, but market attention will likely be entirely focused on the elections.

In the US, "the American economy is continuing its desired soft landing. The visibility offered by the United States is very appreciable in these times of uncertainty." says Emmanuel Auboyneau, Managing Partner Amplegest. A working hypothesis further supported yesterday by the ISM manufacturing index, which came out below expectations at 48.45. Employment, which is the central theme of the week on a statistical level, will allow us to further validate, or not, the quality of the landing.

Immediately, currency traders took note of the first estimates of consumer prices in the Euro Zone for the month of June. Consumer prices, excluding food, energy, alcohol and tobacco, rose 2.8% year-on-year, slightly above the consensus (+2.7%).

To be followed at 16:00 (EU time) the new job offers (JOLTS) in the United States. The week will be rich in benchmarks on employment, with the statistical highlight on Friday being the NFP (non-farm payrolls) report on the health of private employment, outside agriculture, across the Atlantic. To follow at 15:30, interventions by J Powell, President of the Fed, and C Lagarde, President of the ECB, as part of the ECB forum in Sintra, Portugal.

The central banker has already given a speech in Sintra after the market close. According to Deutsche Bank, Christine Lagarde declared that the ECB still faced several uncertainties in its fight against inflation, particularly in terms of the evolution of wages, productivity and profits. The ECB president also added that the institution would need time to collect enough data to be sure that the risks of inflation above its target were eliminated.

Right now, the EUR/USD is trading at $1.0735.

KEY CHART ELEMENTS
In high volatility, the EUR/USD has regained the upper part of a bearish oblique line, providing a short-term supply of oxygen. The technical signals are immediately contradictory and do not allow for a calm position to be taken. In all cases, we are suspending our sales lines.

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 $1.0664 and resistance at $1.0758.