EUR/USD: Doji stars are appearing

Buying and selling forces continued to balance out on the EUR/USD in the very short term, in a foreign exchange market that is still questioning the far-reaching consequences of the trade war, even though concrete progress has been noted between Washington and, respectively, Beijing and London.

"While investors have naturally welcomed these initial developments, we cannot help but note the haste with which the United States is announcing still-unclear agreements (and others that are expected to follow), the details of which remain to be negotiated. This reflects, in our opinion, the Trump administration's growing desire to roll back tariffs, with the aim of mitigating their potentially negative effects on growth and inflation," says Thomas Giudici, Head of Fixed Income at Auris Gestion.

"Regarding the compromise reached between London and Washington, although it remains relatively anecdotal given the amounts involved, it nevertheless offers some clarity on what could happen with other "friendly" countries (if the United States still has any): a 10% floor rate and orders for American goods (the British airline IAG is said to be placing $10 billion in orders with Boeing)."

Thursday was the day of the week that concentrated most of the American statistical benchmarks. And these releases were generally disappointing. Take retail sales, one of the key measures of American consumption. They rose by only 0.1%, excluding automobiles, missing expectations (+0.3%). The producer price index also missed the target (-0.6% for the broadest basket), which is not in itself a disaster in the sense that the figure temporarily allays fears of a resurgence of inflation. Furthermore, while the Philly Fed manufacturing index fell less than expected (-3.9), the Empire State index plummeted to close to -10. However, there was no change in weekly jobless claims, which remained stable at 230,000 new units, perfectly within the target range.

Forex traders will be closely monitoring the preliminary data from the U-Mich (University of Michigan) index of US investor confidence at 16:00 (EU time). This is a closely watched barometer for an economy where, structurally, domestic consumption is the most powerful driver of national wealth creation, ahead of investment and, of course, the trade balance. This leading indicator is expected to rise by nearly a point to 53.

As a reminder, on Tuesday, traders took note of US consumer prices excluding food and energy, up 0.2% in April, compared to expectations of +0.3%. This is the lowest rate since February 2021.

"US inflation was lower than expected in April. With the threat of tariff-related price increases receding thanks to recent agreements, and leading indicators from the housing sector pointing to a slowdown in housing costs, the Federal Reserve will continue to consider interest rate cuts later in the year," write ING economists.

Right now, the EUR/USD is trading at $1.1193.

KEY CHART ELEMENTS
The EUR/USD is currently in the process of an important chart test: that of the 50-day moving average (in orange), the last time support was found was during the pullback on 28 February. A break of this trendline would release additional selling energy. In the short term, the indecision is graphically reflected by a series of doji stars.

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

We will maintain this neutral view as long as the EUR/USD exchange rate is positioned between the support at $1.1012 and the resistance at $1.1460.