The underlying trend for the EURUSD could not be clearer and remains bearish against a dollar that continues to strengthen, following last Friday’s excellent NFP survey data (263k vs 250k) and a drop in unemployment (3.7% vs 3.5%). The USIndex, which measures the greenback against a weighted basket of six major currencies, has risen to 113.44 and is nearing a 52-week high of 114.75. (see below).
ING believes that “the dollar’s late September highs are well within reach”, and the event of the week, which is none other than the CPI expected this Thursday 13 October (USD, GMT 12: 30), could confirm this trend.
Indeed, even though headline inflation has fallen consecutively over the last 3 months from a record 9.1% in July to “only” 8.3%, the figures are still four times higher than the Fed’s target (2%).
Headline inflation in October is expected to fall from 8.3% to 8.1%, but the CORE index, which excludes food and energy prices and is closely monitored by the Fed, is expected to rise from 6.3% to 6.5%. The question remains as to whether the US has seen its “inflation peak” or whether inflation will remain high over the long term. (/fr/523821/)
Institutional investors expect the Fed to releve ces taux directeurs de 75 Pdb for the fourth time in a row, a first in history. This monetary policy has the effect of tipping the balance in favour of the dollar at the expense of the pair.
EUR/USD
Fed vice-chair Lael Brainard suggested that the US central bank would continue to pursue its mission of lowering inflation, despite the deteriorating growth outlook. “I now expect the rebound in the second half of the year to be limited, and real GDP growth to be essentially flat this year,” said Ms Brainard, referring to the consequences of “a significant increase in interest rates”.
These comments echo those of FED Chairman Jerome Powell, whose aim is to bring interest rates back towards his main target of 2% sooner rather than later, at the expense of economic growth.
Analyse Technique
The EUR/USD is currently at 0.9698 below its cloud, its Kijun (green line) and its Chikou Span (yellow line). The Laguin Span (white line) is below the cloud and its counterparts, clearly signifying a bearish momentum, the price could reach its support at the level of 0.9534, on the other hand, it could initially go for its Kijun at 0.9866 and then eventually reach parity (1).
Standard Chartered Bank consistently summarises what could happen and does not hesitate to state that “EUR/USD should weaken over the next 3 months, potentially testing support around 0.9000, before settling around 0.9300-0.9400.“
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Kader Djellouli
Market Analyst
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