EUR/USD: A pullback is underway

The EUR/USD formed a pullback pattern on a bullish slant, reinforcing the idea that the coming week will be crucial on the technical front.

On Friday, traders noted that August inflation data were in line with expectations. According to the PCE index, the US Federal Reserve's flagship inflation barometer, consumer prices rose last month by 2.6% year-on-year, and by 3% year-on-year in core PCE terms. This price movement is in line with expectations.

"The Fed's preferred inflation measure, the core PCE, still shows no clear signs of acceleration, with tariff increases accounting for only about three-tenths of a cumulative increase in inflation. Under these conditions, the Fed will not hesitate to prioritize labor market stabilisation over inflation if necessary," says Bastien Drut, Head of Strategy and Economic Research at CPRAM.

It should be recalled that the Fed resumed its monetary easing process with a 25-basis-point cut to its key interest rate on 17 September.

"On Tuesday evening, Jerome Powell warned against "overly strong" rate cuts that would cause inflation to spiral out of control. According to him, interest rates are currently "at the right level to respond to potential economic developments." The 25 bps cut implemented [on September 18] was presented as a "precautionary" cut to allow the US economy to regain momentum and avoid an excessive deterioration in the labor market," explained Gregoire Kounowski, Investment Advisor at Norman K.

Of particular note: US pending home sales at 16:00 (EU time) and further interventions by Fed members.

On Thursday, the battery of US macroeconomic statistics on the agenda only reinforced J. Powell's cautious approach to his (very) gradual rate cut process. In detail, the final second-quarter GDP data, which came in well above previous estimates, at +3.9% annualised, clearly marked the session. Furthermore, weekly jobless claims, at 219,000 new units, were a pleasant surprise, as was the momentum in durable goods orders.

On the customs front, the elusive and unpredictable Donald Trump opened a new chapter, announcing Thursday evening a battery of new customs surcharges, with a 100% rate on imported patented medicines, a 25% rate on imported heavy goods vehicles, and a 50% rate on kitchen cabinets and sinks. It should be noted that most of the customs duties unilaterally imposed by the White House since the start of this trade offensive have been deemed "illegal" by a federal appeals court.

Right now, the EUR/USD is trading at $1.1718.

KEY CHART ELEMENTS
The break of the downward sloping line drawn in black does not, at least at this stage, cast doubt on the strength of the primary bullish trend, but it does raise questions about the currency pair's need for consolidation. We once again issue a neutral opinion on the EUR/USD spot price.

MEDIUM-TERM FORECAST
In light of the key chart factors we have mentioned, our medium-term opinion on the Euro/Dollar (EUR/USD) pair is neutral.

We will maintain this neutral opinion as long as the EUR/USD is positioned between the support at $1.1608 and the resistance at $1.1835.