EUR/USD: What's new with the pair?

The euro continued its sideways consolidation against the dollar, supported by the now-clear prospect of Germany breaking its fiscal lock, its famous golden rule.

"Structural changes in fiscal policy in Europe, particularly in Germany, are certainly important factors triggering the upward movement of the single currency," explains Claudia Panseri, Chief Investment Officer at UBS WM France. "Although the announced plans are still preliminary, they reflect a growing willingness among European leaders to increase military spending in response to the reduction of the United States' commitment to European defense affairs and aid to Ukraine."

Traders are also keeping a close eye on April 2nd, and the possible introduction of new customs duties on entry into the United States. This is based on the principle of reciprocity. According to the Wall Street Journal, certain sectors could be excluded from these tariff surcharges.

"A wait-and-see attitude will prevail before Donald Trump's announcement on April 2 of reciprocal tariffs, potentially followed by retaliatory measures from the United States' trading partners," summarises Cesar Perez Ruiz, Chief Investment Officer and CIO at Pictet Wealth Management, who notes a key moment this week, Friday, 28 March, with the publication of the Fed's preferred measure of price dynamics: "core PCE inflation," with the Fed anticipating a delay in the disinflationary trend this year, partly due to tariffs. In anticipation of April 2 - "Liberation Day" according to Donald Trump - the European Union postponed its 50% tariffs on American whiskey until mid-April, which leaves room for negotiation."

A Fed whose equation is becoming increasingly complex, as the latest FOMC (Federal Monetary Policy Committee) meeting clearly demonstrated. "Declining growth, rising inflation... the Fed is caught between two fires and, lacking the ability to decide which way to turn, it prefers not to overreact, and it has the means to do so," in the words of Thomas Giudici, head of fixed income at Auris Gestion. "Jerome Powell is absolutely determined to avoid returning to a restrictive monetary policy, the effects of which take time to diffuse through the economy, while the prevailing uncertainty and the impacts of tariffs could only be temporary. The fact that FOMC members are still anticipating two rate cuts by the end of the year, even though inflation could rebound, was perceived as a dovish bias by the financial markets, which welcomed the news."

On the statistical front today, foreign exchange traders took note of the German IFO business climate index, which rose slightly to 86.6, very close to the target. The economic cycle matrix tool clearly shows a trajectory from the "Crisis" box to the "Recovery" box. The big event this afternoon at 15:00 (EU time) on the statistical front is the sacrosanct Conference Board household (read: consumer!) confidence index in the US. This is an important benchmark at a time when inflationary fears stemming from Trump's expansionary and anti-immigration policies are weighing on buyers' morale.

Right now, the EUR/USD is trading at $1.0824.

KEY GRAPHIC ELEMENTS
The break above $1.0608 amid significant volatility changes the situation for the currency pair, which has just validated a resumption of support on the long-term 50-day moving average (in orange), initiating a resource pattern. The scenario of a rapid decline towards perfect parity (1 euro = $1) is invalidated. This consolidation is entering its final phase upon contact with the 20-day moving average (in dark blue), against a backdrop of tightening Bollinger Bands.

MEDIUM-TERM FORECAST
In light of the key graphical factors 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 exchange rate is positioned between the support at $1.0758 and the resistance at $1.1012.