EUR/USD: A compression of energy before its release

The EUR/USD continued to consolidate, following its very sharp rise in the first half of April, due to the tariff shock triggered by the White House. The USD is currently stopping its hemorrhage as the trade war is currently focused on the Pacific front. However, currency traders naturally remain attentive to the slightest development in this area.

"While, in the aftermath of Liberation Day, one could legitimately expect that customs duties would be gradually revised downward and that there was ultimately more good news than bad to be expected, the current situation, however, seems to us to be slightly the opposite. Indeed, Donald Trump will not reverse the very principle of customs duties, and it therefore seems difficult to adopt a more optimistic stance than the one already priced in by the markets. Above all, the concrete effects of the trade war on corporate results do not yet seem to be fully at the center of attention," warns Tom Giudici, Head of Fixed Income at Auris Gestion.

Forex traders will have to contend with a major monetary event tomorrow. The Fed concludes its monetary policy meeting (FOMC) this Wednesday. The US central bank is expected to leave rates unchanged, Barclays predicts, along with the entire financial community.

"We expect the May statement from the Monetary Policy Committee and Jerome Powell to acknowledge that some market- and survey-based measures of short-term inflation expectations have increased, and that household and business surveys indicate declining sentiment and increased uncertainty about the outlook," the British bank writes.

In terms of statistics, investors yesterday took note of the "Sentix", an index measuring investor confidence in the Eurozone. It remained in negative territory at -8.1, but the rebound is strong, with the score being -19.4 last month. The barometer indicator significantly exceeded expectations, at -15.

The eponymous research institute provided the following insights: "One month after the massive shock that shook investors due to US tariff policy and caused a freefall in Sentix economic data, the situation is calming down. Investors are revising their economic analyses, sometimes significantly."

"Investors acknowledge the calm observed so far regarding US tariffs. The current situation and expectations show signs of recovery. The main victims of Trump's tariff policy are the US economy and, to some extent, the Chinese and Swiss economies. However, the period of uncertainty is probably not over."

Furthermore, currency traders noted a surprise acceleration in activity in the US tertiary sector in April. The ISM services index rose to 51.7 points last month, compared to 50.8 in March. This index was expected to reach 50.3 points, according to the market consensus. However, the sub-index measuring actual prices rose to 65 points, compared to 61 points in March.

Right now, the EUR/USD is trading at $1.1342.

KEY CHART 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. A zone An accumulation area between 1.1460 and 1.1674 has been identified, along with an upward target of $1.1970 in the long term.

MEDIUM-TERM FORECAST
In light of the key chart factors we have mentioned, our medium-term view on the EUR/USDexchange rate is neutral.

We will maintain this neutral view as long as the EUR/USD exchange rate is positioned between the support at $1.1202 and the resistance at $1.1460.