EUR/USD: Many stats out today

The EUR/USD fluctuated nervously around $1.1610 as tensions rose again in the Middle East. The US military shot down 5 Iranian drones and conducted airstrikes on a ground base in south Iran, which retaliated by targeting a US base and ships in the Strait of Hormuz. This surge in tensions boosted oil prices, which had fallen the previous day amid expectations of a possible agreement between the United States and Iran.

The price of West Texas Intermediate (WTI) crude, the West Texas Intermediate (WTI) benchmark, was $91.29 a barrel at the time of writing.

"Geopolitical risks remain very much present, notably the persistent uncertainty surrounding the Strait of Hormuz and the stalled peace negotiations, which led to a significant rise in oil prices at the end of the month," says Laurent Denize, Head of Investments at ODDO BHF, who sees "a continuation of the status quo: an intermediate situation between war and peace, characterized by the latent risk of further attacks against roads and transport infrastructure."

So much so that traders now have a fear for the Old Continent: that of a resurgence of inflation fueled at its base by the firmness of oil prices, all against a backdrop of slowing already sluggish growth, a slowdown that could be psychologically reinforced by investors, as the prospect of an ECB interest rate hike takes shape.

Alex Baradez, an analyst for IG France, has compiled the elements (figures and rhetoric) that support this view.

"Markets are still pricing in an odds of over 75% for a 25 basis point increase in the deposit rate in June, from 2.00% to 2.25%.

"Remarks made by Isabel Schnbel, a member of the ECB's Executive Board, support this view. She stated that 'in the current context, a rate hike in June seems necessary to me.' Adding that 'given the magnitude and persistence of the current shock, waiting (looking through) is no longer an option in my opinion.' She also declared that 'even if the war were to end today, global energy infrastructure and supply chains have already suffered significant damage.' 'In terms of persistence, we are actually beyond the adverse scenario, which assumed a rapid normalization of oil prices.'"

"This proactive stance was also displayed by Francois Villeroy de Galhau, a member of the Governing Council, who is usually centrist in his positions." He stated that "Households and businesses can trust us to bring inflation back to 2% in the medium term; we will not hesitate to act to achieve this if necessary."

Right now, the EUR/USD is trading at $1.1620.

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 move. A sustained impulse. 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 sent a negative technical signal, which resulted in a downward acceleration in the form of a break below the 200-day moving average (in brown).

A temporary rebalancing of the forces at play is underway, before a bearish restart.

MEDIUM-TERM FORECAST
Based on the key technical factors we have mentioned, 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 $1.1765.