EUR/USD: Trump sets a limit to FED's independence

The USD remains under pressure amid Washington's trade war against the rest of the world, particularly against Beijing. It was this trade war that the Governing Council of the ECB had to contend with last week. The meeting unsurprisingly resulted in a 25 basis point cut in the main interest rate, the euro's "rent."

"Contrary to the March statement, there is no assessment indicating that monetary policy is 'significantly less restrictive.' According to President Lagarde, attributes such as 'restrictive' or 'neutral' are not useful for characterizing monetary policy because, in a world full of shocks, monetary policy must be calibrated to achieve the objective of sustained price stability. That is the only way forward," explains Ulrike Kastens, Senior European Economist at DWS.

"Regarding financial stability, she emphasized the fundamental importance of the European Central Bank's independence."

In the US, it is precisely this question of the independence of the central bank, the Fed, that is being raised more than ever. Trump shakes this independence, which is nevertheless guaranteed by law.

Donald Trump once again attacked the head of the US central bank on Monday, calling him a "loser," while the ongoing tensions between the US president and Jerome Powell are already worrying the markets.

"There could be a SLOWDOWN in the economy unless "Mr. Too Late," a huge loser, lowers interest rates, NOW," Donald Trump wrote on his Truth Social network, in a transparent reference to the Fed chief.

The US president believes that Jerome Powell should take a leaf out of the book by the European Central Bank, which "has already lowered its rates seven times." He also accused the Fed chief of acting politically. He threatened to fire him, even though the central banker's term runs until May 2026.

"While potential risks to the Fed's independence had already made headlines in recent weeks, yesterday's market movements (Monday, editor's note) were the clearest sign yet of investor anxiety on the issue," commented Deutsche Bank.

"The removal of the Fed chairman before the end of his term in May 2026 could call into question the central bank's ability to set interest rates without political interference, and therefore the outlook for price stability," noted Mark Haefele, Chief Investment Officer at UBS Global Wealth Management.

Right now, the EUR/USD is trading at $1.1451.

KEY GRAPHIC ELEMENTS
The triangle consolidation from 4 to 9 April is now over, with the currency pair having violently broken out. The energy released is significant, but the ease with which the EUR/USD is shattering resistance suggests a continued upward trend. An accumulation zone between 1.1460 and 1.1674 has been identified, as well as an upward target of $1.1970.

MEDIUM-TERM FORECAST
Based on the key chart factors we have mentioned, our medium-term view is positive on the EUR/USD exchange rate.

Our entry point is at $1.1494. The price target for our bullish scenario is $1.1970. To protect your invested capital, we recommend placing a protective stop loss at $1.1339.

The expected return on this strategy is 476 pips and the risk of loss is 155 pips.