The euro/dollar set has as soon as again showed a southern impulse. Nevertheless, the other day’s correction did not continue as the bears returned the price to the location of the 12th figure. Such cost dynamics are fully warranted due to the fact that the single currency is now under pressure not only from the economic problems of the eurozone but also from political
uncertainty in Spain. Spanish politicians are the only ones that make traders anxious. In France, the protests of the “yellow vests” do not decrease and in Italy, the trade unions just recently objected, where representatives of the association of industrialists joined them. Specialists warn that such beliefs on the eve of the elections to the European Parliament, which will be held in three months, are a wake-up signal to the marketplaces. The popularity of populist and nationalist political forces is growing in the EU countries, so the outcomes of the basic European elections may unpleasantly shock.
According to preliminary forecasts, there will be more groups in the European Parliament, while agents of big factions will not be able to repeat their previous results. This is filled with the truth that the European Parliament will be fragmented, and coalitions will be produced with terrific trouble. In addition, according to a number of political researchers, Eurosceptics will block lots of initiatives, mainly in the sphere of migration legislation.
In this context, the most recent German regional elections look significant, which were held last fall. The outcomes of the plebiscite revealed that electoral choices are altering in Germany and these modifications are not in favor of European combination. The main sensation of the last election was the amazing success of the ultra-right. For 4 years, they strengthened their positions tenfold and had the ability to enter into parliament, showing the dominating mindsets in society.
In other words, factors such as the popularization of ultra-right political forces, the increase of anti-immigration rhetoric and the increasing function of nationalist ideas weigh on the prospects for the development of the European Union. Similar trends can be shown in the result of the pan-European elections. This reality puts pressure on the single currency, particularly versus the background of a downturn in the key indications of the eurozone and softening the rhetoric of the ECB.
Yet, Spain has ended up being the catalyst for today’s rate decrease of EUR/USD set. There will be remarkable parliamentary elections once again for the 3rd time in a row over the previous four years. The deputies might not find a compromise on the proposed spending plan, requiring the prime minister to announce early elections. Therefore, on April 28, the Spaniards will not only appreciate the work of the socialist government but likewise change the political format of the parliament – at least, many local professionals are sure of it.
It needs to be noted here that the occasions in Spain should not be viewed only in an unfavorable context. Despite the reality that any extraordinary elections are definitely difficult for the markets, their results can positively affect the single currency. The fact is that literally a few days ago there was a mass demonstration in Madrid, which was participated in by tens of countless local homeowners. They opposed against the country’s Social Democratic Prime Minister Pedro Sanchez, who in their viewpoint, acts “too liberally” in relation to the Catalan federal government and supporters of the separation of the region from Spain. To put it simply, the protesters spoke in favor of the unity of the nation, expressing demonstration to the present government and parliament (till March 5), if pro-European political forces concern power (in specific, representatives of the People Party) following the spring elections.
In spite of such possible potential customers, the marketplace reacted negatively to today’s events in Spain. Traders are concentrated on existing occasions while long-term forecasts have little result on the dynamics of the EUR/USD set. Financiers are worried about the growing political uncertainty in the eurozone nations, in addition to, the slowdown of the EU economy and vague prospects for Brexit.
In addition, the probability of a resumption of the trade war in between the United States and China has actually increased once again in spite of the ongoing negotiation procedure. According to Chinese leader Xi Jinping, trade settlements will be resumed with their next round to be held next week in Washington. Agents of the working out group avoid any specifics in their comments. The essence of their declarations boils down to the truth that they have actually made some progress, although there is still a lot of work to be done. Such veiled declarations alarm traders, given the truth that the “deadline” on March 1 is simply around the corner.
Thus, the single currency is still not strong enough to recuperate. In such situations, anymore or less massive correctional development of EUR/USD set need to be thought about as an event to open brief positions. The nearest southern target is 1.1230, which is the bottom line of the Bollinger Bands indication on the weekly and daily charts. If the bears combine listed below this support level, they will break the ice to the level of 1,1100, which is the bottom line of the Bollinger Bands however on the month-to-month chart.
The material has been provided by InstaForex Company – www.instaforex.com