EUR/USD: A fresh perspective to work with

The EUR/USD consolidated its violent rise that began at the end of last week, against a backdrop of fears that the world's largest economy was entering a recession.

Everything accelerated on Thursday, with the publication of an activity indicator (ISM manufacturing), two points below expectations that were themselves pessimistic, and on Thursday, with a report on employment that was particularly disappointing, particularly on the job creation front, and the surprise increase in unemployment, to 4.2% of the working population.

However, the weekly registrations for unemployment benefits, published yesterday, provided a welcome boost to the greenback. They came out at 234,000 new units, against a consensus of 241,000, and a week earlier at 251,000.

However, we should not cry victory too quickly, warns Florian Ielpo, head of macro research at Lombard Odier IM: "It is difficult to read a significant message in these data. This latest figure remains consistent with the recent upward trend in benefit applications: the enigma of the Sahm rule therefore remains intact".

The "Sahm ​​rule" establishes a link between the unemployment rate and the risk of recession in the United States. It assumes that the American economy enters into recession when the average of the last three months of the unemployment rate is higher by 0.5 percentage points (50 basis points) or more than its lowest level of the last twelve months.

The economic trajectory of the United States, through the macroeconomic publications of the coming weeks, will constitute the essential working matrix for the currency pair that interests us here. This Friday, no major figures are on the agenda. The agenda will get denser next week with producer prices on Tuesday, consumer prices on Wednesday, retail sales on Thursday, and consumer confidence (U-Mich) on Friday.

Right now, the EUR/USD is trading at $1.0910.

KEY CHART ELEMENTS
Our short positions are immediately stopped on the EUR/USD, with the volatility that exploded on Friday. We are still waiting for clear signals allowing us to glimpse a new sustainable directional, before exposing ourselves again.

MEDIUM-TERM FORECAST
In view of 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 rates are positioned between the support at $1.0906 and the resistance at $1.1012.