EUR/USD: A scissor effect on the pair

Short-term momentum remained bearish for the EUR/USD, which was caught in a "scissor effect": on one hand, the dollar has regained strength following Jerome Powell's "hawkish" remarks at the Jackson Hole symposium on Friday; on the other, the euro - the quintessential barometer for risk appetite - lost ground as geopolitical tensions in the Middle East intensified.

As a reminder, during the Jackson Hole symposium, the Fed Chair stated on Friday that inflation in the United States was "concerning" and that he could "hardly" describe current monetary policy as "restrictive." This leaves the Fed with room to further tighten policy should inflation fail to recede.

"The Fed Chair clearly seized this opportunity to set the record straight. His assessment of the macroeconomic landscape is clear: the US economy remains robust, the labor market is near full employment, and financial conditions remain loose. Meanwhile, inflation remains far from the 2% target, and its persistence is increasingly difficult to attribute solely to a series of temporary shocks. Even more problematic, it is not converging toward the 2% mark quickly enough for him to consider the battle won," comments Thomas Giudici, Head of Fixed Income Management at Auris Gestion.

Regarding the geopolitical situation in the Middle East, Iran claimed on Monday to have attacked US military targets in Jordan and the United Arab Emirates in retaliation for US-led airstrikes - marking the first exchange of fire in a month and undermining the relative calm that had prevailed in the Middle East conflict for several weeks. This development naturally provided support for crude oil prices, pushing WTI (the Texas benchmark) to nearly $88 per barrel.

However, LBPAM economists take a nuanced view: "It now seems clear that a resolution to the conflict - involving the full opening of the Strait of Hormuz - is not the most likely scenario in the short term. We believe the situation has become deadlocked. Yet, even if this stalemate persists for a few months, energy price increases should remain contained. We have factored in high energy prices (oil and gas), but not at levels likely to severely damage the economic outlook."

The key figure of the morning - the initial estimate for consumer prices in the monetary union - has just been released, showing a year-on-year rise of 2.3% in August. This represents a slight slowdown compared to July (2.4%) when excluding volatile items such as food, energy, alcohol, and tobacco.

Also to watch is the US ISM Manufacturing PMI at 16:00 (EU time), a benchmark indicator of economic activity.

Right now, the EUR/USD is trading at $1.1598 on the foreign exchange market.

KEY TECHNICAL FACTORS
The Euro/Dollar currency pair is currently testing its 200-day moving average (shown in brown) as it seeks a clear trend. There is currently no clear technical signal justifying a position in either direction.

MEDIUM-TERM FORECAST
Based on the key technical factors mentioned above, our outlook for the Euro/Dollar (EURUSD) pair is neutral in the medium term.

We will maintain this neutral stance as long as the EUR/USD remains between the support level at $1.1512 and the resistance level at $1.1711.