EUR/USD: An ascending triangle chart figure

The EUR/USD peaked at a graphical resistance zone ($1.146), awaiting concrete conclusions on the Sino-US talks. In the meantime, traders are digesting the ECB Governing Council meeting, which concluded last week. While the Frankfurt-based central bank unsurprisingly lowered its key interest rate by 25 basis points, the slightly firmer tone adopted by Lagarde at the press conference suggests a lengthy pause in the monetary easing process, which is admittedly already well underway on this side of the Atlantic. "The ECB President displayed unexpected firmness, stating that the institution was 'at the end of a monetary policy cycle.' This was a strong, unusual stance. As a result, a pause now seems certain at the July meeting, and according to market expectations, it will probably take until December to consider a further cut," predicts Romane Ballin, bond manager at Auris Gestion. "The ECB therefore remains cautious, and rightly so. The geopolitical climate, particularly rising trade tensions, complicates the equation. US tariffs, by slowing activity, are rather disinflationary; on the other hand, the expected response from Europe could revive pressure on prices."

Prices will be discussed at 14:30 (Paris time) with the main statistical release this Wednesday, namely US consumer price inflation (CPI). It remains to be seen whether this publication will reduce the tensions weighing on the shoulders of J. Powell, Chairman of the Federal Reserve.

"The task is difficult for the Fed, which is certainly awaiting more clarity on the trade war being waged by the White House. Moreover, on this point, we should note the tentative improvement in relations between China and the United States. Donald Trump and Xi Jinping have finally spoken. This is their first direct exchange since Trump's inauguration, and the two leaders have agreed to resume trade negotiations," continues Ms. Ballin.

The consensus is +2.25% in annualised data, for the broadest basket of products.

Regarding customs issues, Deutsche Bank notes that the Chairman of the Economic Council of the United States, Kevin Hassett, told CNBC that he expects "all US export controls to be relaxed and rare earths to be released in volume" following these negotiations.

"This therefore suggests a potential compromise in which the United States would relax its export controls in exchange for China easing its own restrictions on rare earths," concludes Deutsche Bank.

Chinese rare earths are a key issue in the negotiations, with the United States hoping to restore the pace of shipments of these strategic metals, which has slowed since the US president launched his global trade war in early April, AFP explains.

Right now, the EUR/USD is trading at $1.1435.

KEY CHART ELEMENTS
The currency pair is currently passing the highly important chart test of the 50-day moving average (in orange). A breather is needed before setting new highs. That is, the formation of several support points on this trendline. We currently have two. However, a break above $1.1460 would immediately fuel the upward momentum for the coming weeks. A rising triangle would then be validated.

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

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