EUR/USD: Xi and Trump in the news...

The near-effective appointment of Karl Warsh as head of the Fed has been overshadowed by a resurgence of inflation in the US, a resurgence that further complicates the monetary institution's situation.

Published yesterday, producer prices, expected to rise by 0.4%, surprised markets, increasing by 1.3% in April, after 0.6% in March. This is the largest increase since March 2022, and the start of the war in Ukraine. On an annual basis, producer prices rose by 6%, while the consensus forecast was for a 5% increase.

Surprised by higher-than-expected inflation, interest rates on 10-year US Treasury bonds climbed to 4.49%, their highest level since June 2025.

The release the previous day of US consumer price data for April sent a chill through the markets. Inflation in the US rose more than expected, by 3.9% year-on-year in April, compared to a consensus forecast of 3.8% and after 3.4% in March, according to the Consumer Price Index (CPI). This is its highest level since 2023.

"The rise in US inflation in March and April, that is, since the start of the Iran nuclear deal, is explained for more than three-quarters by the acceleration in energy prices," stated Bastien Drut, Head of Strategy and Analysis at CPRAM, on Tuesday.

"Fed interest rate futures now price in a greater than 50% probability of a rate hike by March 2027. While further rate hikes remain possible if inflationary pressures continue to intensify, a potential de-escalation of the conflict in the Middle East, along with the relative weakness of the labor market, should lead the Fed to keep rates unchanged in the short term. At this stage, however, we believe that rate cuts remain more likely than hikes in 2027," comments Josh Jamner, Senior Investment Strategy Analyst at ClearBridge Investments (a subsidiary of Franklin Templeton), following the release.

Currency traders are naturally continuing to monitor the geopolitical situation in the Middle East, as Trump is on a diplomatic visit to China. During his visit to Beijing, Donald Trump hopes that China will play a role in negotiating a way out of the crisis with Iran.

"It's going to be great,"  Trump declared upon leaving the United States. He had stated in mid-April that Xi Jinping, not given to public displays of affection, would give him a "big hug" in Beijing. On Tuesday, he went even further, emphasizing the promises of his trip and the quality of his personal relationship with his counterpart, a "friend of mine"...

Right now, the pair is trading at $1.1675.

KEY TECHNICAL ELEMENTS
From a technical perspective, the EUR/USD is now encountering a pivotal zone. After erasing much of its decline related to the acute phase of the conflict, it is trading near the upper limit of its range. This configuration reflects a compression of volatility and marked hesitation among market participants, who are currently unable to trigger a sustained upward movement. In the absence of a clear catalyst - whether macroeconomic, monetary, or geopolitical - the pair remains contained below this major resistance ($1.1825), in a wait-and-see phase that could lead to a more directional move once this equilibrium is broken.

The hanging man candlestick pattern of 10 May sends a negative technical signal.

MEDIUM-TERM FORECAST
Based on the key technical factors we have mentioned, our outlook for the EUR/USD pair is negative in the medium term.

Our entry point is at $1.1709. The price target for our bearish scenario is $1.1461. To protect your capital, we advise placing a stop-loss order at $1.1781.

The expected profit for this strategy is 248 pips, and the potential loss is 72 pips.