EUR/USD: the euro resists despite tensions

The announcement of a blockade targeting Iranian oil flows, with Hormuz as a backdrop, has reintroduced a major energy risk. Oil prices have risen back above $100, injecting a wave of global inflation.

In this context, the dollar remains supported, but imperfectly. The main channel remains interest rates: rising energy prices are fueling inflation expectations and forcing the US Federal Reserve to maintain a restrictive policy. Jerome Powell is adopting a wait-and-see approach, which postpones the prospect of monetary easing and provides a foundation for the greenback.

However, the bond market is tempering this support. The stabilisation of long-term interest rates suggests that the oil shock is beginning to be perceived as a drag on growth rather than simply a driver of inflation. The risk is gradually shifting towards a slowdown scenario.

Recent indicators confirm a turning point. Real consumption rose by only 0.1% in February, after a month of stagnation, while disposable income fell by 0.4%, its sharpest decline in nearly a year. The savings rate dropped to 3%, a sign of households directly adjusting to price pressures.

At the same time, core inflation, as measured by the PCE index, rose by 0.5% month-on-month and reached 2.9% year-on-year, maintaining a significant constraint for the US Federal Reserve. Meanwhile, the University of Michigan's consumer confidence index plummeted to 47.5 points in April, a historic low, reflecting a widespread deterioration in economic and financial expectations.

This discrepancy explains the dollar's restrained reaction. Despite a major geopolitical shock, it is not fully absorbing safe-haven flows, indicating that markets are not yet anticipating a global recession but are gradually pricing in a weakening cycle.

From a technical perspective, EUR/USD is trading in the middle of its annual range between 1.14 and 1.20, at the level of its 200-day moving average, indicating a strong neutral stance. Pullbacks towards 1.16 represent the first areas of interest for buyers, while above 1.18, sellers will find opportunities to sell.

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 stance as long as the EUR/USD exchange rate remains between the support level at $1.1608 and the resistance level at $1.1765.