EUR/USD: In immediate proximity to a technical pivot point

Against the backdrop of a brutal challenge to the Fed's independence, and with the release of US inflation figures approaching, the EUR/USD found support at a key pivot point of $1.1610.

"Trump has to contend with the fierce opposition of Jerome Powell, who is committed to the Fed's independence and is under attack from the MAGA sphere. In the latest development, an investigation was announced yesterday against Powell for allegedly making false statements to Congress regarding the renovation of the Fed headquarters, though no charges have been filed so far. Such pressure is being exerted while the precarious situation in the US job market argues in itself for a cut in key interest rates!" says Sebastien Grasset, Head of Asset Management at Auris Gestion.

Indeed, following the release of the Non-Farm Payrolls (NFP) report on Friday, the probability of a 25 basis point cut in the Fed Funds rate plummeted, according to the CME Group's FedWatch tool.

The monthly report presents a paradoxical picture, since at the same time, private-sector job creation was weak, even weaker than the consensus forecast, at 50,000, and the unemployment rate fell more sharply than expected, to 4.3% of the labour force. The good news comes from the stabilization of wage growth at +0.3% month-over-month.

"This threat is not about my testimony. It's a pretext; the threat of legal action is a consequence of the Fed's commitment to setting interest rates in the best interest of the public rather than to accommodate the president's preferences," said Jerome Powell.

Stephen Innes of Spi AM goes so far as to call it "the day the Fed lost its political immunity."

"For decades, the Fed was considered primarily a central bank and never a political institution. This implicit contract allowed Treasury bonds to be risk-free, the dollar to anchor global finance, and US assets to benefit from a premium, even when policy mistakes piled up. Once this contract is called into question, everything that stems from it begins to be re-evaluated," the market specialist explains.

"What makes this moment particularly disconcerting is the timing. The Fed is already doing what the White House wanted (?) Yet, even as the Federal Reserve adopts an accommodative stance, the pressure is intensifying instead of easing. This indicates that it's no longer just about interest rates. It's about control," he concludes.

Right now, the EUR/USD is trading at $1.1651.

KEY TECHNICAL ELEMENTS
While the short-term bias remains confirmed by the relative position of the 20-day and 50-day moving averages after their crossover, the buying entry point is not optimal at this stage.

A significant new technical test is looming: the 200-day moving average (in brown).

MEDIUM-TERM FORECAST
Based on the key technical factors mentioned above, our medium-term outlook for the EUR/USD 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 $1.1771.