EUR/USD: A strong hold above $1.1460 amdist geopolitical tensions

The EUR/USD consolidated above $1.11460, a major technical and chart level it yielded at the heart of last week, following an announced trade deal between China and the US, with as the main stake rare earths, and as leveraging customs duties. An agreement which sets a general framework which has not, however, strengthened the appetite for risk on financial markets. And this as much as the embrace of the geopolitical situation in the Middle East has, since then, provoked crispation in the market halls.

Israel attacked Iran overnight from Thursday to Friday, targeting military sites and nuclear facilities. On the fourth day of the conflict, the Israeli army announced early today that new missiles fired from Iran towards Israel had been detected. Since Friday, at least 225 deaths have been reported in Iran, against at least 11 people killed in Israel.

On Saturday and Sunday, the offensives of the two countries were pursued. On Saturday, Tel Aviv attacked the South Pars gas field in southern Iran. It's the largest known gas reserve in the world, shared between Iran and Qatar.

This bombing shows that Israel does not hesitate to target Iran's energy infrastructure. According to Bloomberg citing the Israeli news agency Tasnim, this attack, which targeted section 13 of the gas field, forced the shutdown of a production platform on the gas field.

"The coming days will tell us what risks we will be facing, but they are clearly negative for the global economy," explains Sebastien Paris Horvitz, of LBPAM. "We cannot fear an escalation. In fact, the stock markets are reacting negatively (...) and oil prices are soaring, reaching a price around $75 a barrel (Brent), are at their highest level since the beginning of the year", the economist continues.

"The powder of the Middle East has just jumped the lid of global markets (...) This time, the flames are no longer metaphorical", comments Stephen Innes, of Spi AM. The expert fears that a closure of the Strait of Hormuz, through which transits 20% of global oil consumption, will worsen the situation.

"If the Strait of Hormuz, which represents 20 % of global oil flows, is within the blast radius, you can add $15 per barrel," he estimates.

The geopolitical situation in the Middle East overshadowed Friday's main statistic, namely preliminary data from the consumer confidence index (U-Mich), springing significantly above expectations, at 60. On the macroeconomic agenda this Monday, to follow primarily the NY Fed manufacturing index at 14:30 (EU time). He noted E Macron's diplomatic trip to Greenland yesterday, aimed at reaffirming the EU's opposition to US annexation velvets. And that just before the G7 in Canada. Note on the exchangers' agenda tomorrow, at 14.30, US retail sales, an essential measure of consumption that for reminder, remains structurally the main driver of national wealth creation across the Atlantic.

Right now, the EUR/USD is trading at $1.1576.

KEY CHART ELEMENTS
On Thursday the spot broke free of a resistance area at $1.1460, an area that is already being tested early, in the form of a pullback this Friday. The absence of bullish expansion after the $1.1460 franking casts doubt as to the spot's ability to continue in the coming weeks its upward move from the bottom. The test of the 50-day moving average (in orange) will therefore be essential.

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

We will maintain this neutral view as long as the EUR/USD is positioned between support at $1.1460 and resistance at $1.1674.