EUR/USD: Sell positions are once again suspended

The euro broke back above an oblique resistance line (in black), this time more decisively, as currency traders took note of the ECB's more restrictive tone and as a 25 basis point rate cut at the last FOMC meeting of the year, scheduled for 10 December, became more likely. Between now and then, traders will be watching for valuable employment and price data. This begins with PCE prices on Friday, the Fed's preferred measure for assessing inflation. The ADP employment report and weekly jobless claims will punctuate the week for currency traders, providing valuable information to guide the Fed's interest rate trajectory in the first half of 2026, before a new head takes the helm of the powerful monetary institution. A person already chosen by Trump.

Xavier Chapard, strategist at La Banque Postale AM, notes that President Trump stated this weekend that he had identified the candidate to become the new chairman of the Fed. However, he did not mention a name. As long as he remains loyal to him, and willing to loosen the monetary policy no matter what...

"Trump wants someone at the head of the Fed who is prepared to lower interest rates. Of the five potential candidates, the persistent rumor is that Kevin Hassett has been chosen, a close advisor to the president, who was appointed early in the presidency to head the National Economic Council. In the numerous interviews he has given recently, K. Hassett has emphasized the Fed's independence. Nevertheless, his close ties to the President are a source of mistrust. However, we believe he should be confirmed by the Senate and that the market will give him the benefit of the doubt...at least initially. We maintain our view that the Fed will succeed in maintaining its independence, even with K. Hassett at the helm of the institution starting in May 2026."

"Whatever the chosen profile, the tone of the next Fed chairman could prove significantly more accommodative. Donald Trump has been explicit: he expects the next Fed chairman to quickly implement rate cuts," adds Romane Ballin, bond manager at Auris Gestion.

On the statistical front, there were no surprises yesterday morning regarding consumer prices, excluding food, energy, alcohol, and tobacco (volatile items), which rose by 2.3% year-on-year for November in the preliminary estimate for the Eurozone. However, in the broader calculation base, inflation rose slightly (+2.2% compared to +2.1% in October).

KEY TECHNICAL ELEMENTS
The descending trendline (in black), which has been exerting pressure since September 18, has been broken, at a level that also coincides with the positioning of the 50-day moving average (in orange). Confirmation is needed before declaring a polarity reversal, but the signal is sufficient to stop our short positions on the currency pair.

MEDIUM-TERM FORECAST
Based on the key technical factors mentioned above, our medium-term outlook for the EUR/USD pair is neutral.

We will maintain this neutral outlook as long as the EUR/USD exchange rate remains between the support level at $1.1460 and the resistance level at $1.1760.