EUR/USD: Equilibrium ahead of impending volatility

The EUR/USD found a very short-term equilibrium point, marking the end of the pullback (graphic rejection) on $1.0550, in the absence of benchmarks from Wall Street, which remained closed yesterday for the Thanksgiving holidays. Note that the stock market debates will resume their rights this Friday, for a shortened session, which will end at 19:00 (EU time). And this is without any major micro or macroeconomic publications. Suffice to say that this half-session will provide little information, as the number of operators is likely to be limited in the heart of this long weekend, sacred for many American families.

Let us recall that on Wednesday, the macroeconomic program was particularly copious. The American Federal Reserve's preferred inflation gauge, namely PCE prices, accelerated slightly to 2.3% over one year in October, and 2.9% for its component excluding food and energy, which is in line with market expectations. Shortly before the opening of Wall Street, a battery of American statistics, concentrated before Thanksgiving, came to liven up the debates. Let's start with the traditional new weekly registrations for unemployment benefits, which give an idea of ​​the state of tension in the job market. They come out at 214,000, very close to expectations. No deviation from the consensus concerning Q3 GDP, at +2.7% on an annual basis in preliminary data. Durable goods orders do not send a particularly readable message either, due to a small deviation from the consensus, on the other hand, the monthly trade balance of goods, structurally in deficit, pleasantly surprises by coming out below the symbolic threshold of 100 billion deficit.

Basically, no major change, Europe's economic disconnection from the United States is strengthening, resulting in a disconnection of the single currency on exchange rates.

"The Eurozone is more than ever penalized by its two (former) locomotives stuck, what's more, in political blockages. While we are still wondering how France will manage to bring its public finances back on track (without, we hope, impacting growth too much), Germany, for its part, must completely review its economic model in place since the 90s and reunification: exports to China, cheap Russian oil and gas and American protectionism. Of the three, none remain", notes Tom Giuduci, head of bond management at Auris Gestion.

While conversely, "everything seems to be going well in the US: producer prices are slowing down, tensions on the labor market are decreasing and, above all, business leaders' forecasts are reaching two-and-a-half-year highs, thanks in particular to the pro-business policy desired by the new American administration."

Furthermore, the appetite for risk, directly correlated to the single currency, remained upset by Trump's very recent remarks on foreign trade. If we knew the 45th, and soon 47th President of the United States, offensive on customs tariffs, very concrete declarations of intent have shaken the Asian and European stock markets.

He wants to impose customs duties of 25% on all products from Mexico and Canada and increase those by 10% for products imported from China. Donald Trump justifies these trade retaliatory measures in retaliation for illegal immigration, and drug trafficking and in particular Fentayl, a powerful opioid that is wreaking havoc in the United States.

"As everyone knows, thousands of people are pouring into Mexico and Canada, bringing with them crime and drugs at levels never seen before," he said. "This tariff will remain in effect until drugs, especially Fentanyl, and all illegal aliens stop invading our country!" continues the great president-elect.

In the immediate future, currency traders have just learned of consumer prices in the Eurozone, in a first estimate for the month of November. Excluding food, energy, alcohol and tobacco, prices are up 2.8% on an annual basis, stable compared to October, where the consensus was counting on 2.9%.

Right now, the EUR/USD is trading at $1.0560.

KEY GRAPHIC ELEMENTS
The currency pair has just come out of a wedge pattern, in intense volatility, which confirms the bearish bias, now in place. Since then, the fragile supports have been breaking one after the other. Negative opinion maintained. Nevertheless, at this stage the decline, the formation of a technical rebound cannot be long in coming, we are watching for signs.

In the immediate future, the flagship currency pair is completing a textbook pullback (graphic rejection) on $1.0550.