EUR/USD: the Euro benefits from China's measures

With the announcement, this time formulated, of new support measures in China, the Euro, a barometer of risk appetite on the financial markets, was well oriented on Tuesday, not far from its annual peaks against the Dollar, close to $1.1140.

"The noise from sources "close to the discussions" has intensified since the start of the school year, suggesting the imminence of measures in the face of a slowing Chinese domestic economy", notes Alex Baradez (IG France), who praises major announcements, "the lowering of the prudential reserve ratio for Chinese banks", "the lowering of a short-term lending rate to banks (7 days)", support for the stock markets and real estate.

"Even if it is not a "bazooka", the measures taken by the Chinese authorities are relevant and targeted in relation to the difficulties the country has been facing for several years."

The MSCI China index jumped 4.46%.

In the statistical chapter, deprived of a sharp macroeconomic benchmark on Friday, operators made up for it on Monday with the preliminary data of the PMI activity indicators in the Eurozone, which missed all their expectations, with a "red card" for German industry, at 40.3 points. Let us recall that a score below 50 means a contraction in the sector considered. On the scale of the entire monetary union, the industrial score for the current month is 44.9 (consensus at 45.8) and the services score 50.5 (consensus of 52.4).

Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, provided the following insights: "The fragility of the industrial economy is reflected in the level of employment, with manufacturing employment having recorded its sharpest decline since August 2020. At the same time, employment growth slowed for a fourth consecutive month in the services sector, and was close to stagnation. Official employment figures, which have remained stable so far, are likely to deteriorate in the coming months, but probably less pronounced than in previous recessionary periods, thanks to current demographic trends."

In the immediate future, the main meeting of the morning for currency traders concerned Germany, whose industry is causing concern. The IFO business climate index in the Eurozone's leading economic power came out lower at 85.5, without however moving significantly away from the consensus (86.1).

To follow for the United States, the S&P Case Schiller index of real estate prices in 20 representative cities at 15:00 (EU time), the consumer confidence index (Conference Board) and the Richmond Fed manufacturing index at 16:00.

Right now, the EUR/USD is trading at $1.1140.

KEY CHART ELEMENTS
The spot has once again weakened an oblique graphic support line, relaunching the idea of ​​the formation of a chart pattern. A clear break of this threshold would weaken the currency pair for the coming weeks. A neutral position is adopted while waiting, if necessary, for a signal.

MEDIUM-TERM FORECAST
In view of the key graphic 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 the EUR/USD is positioned between the support at $1.1012 and the resistance at $1.1250.