EUR/USD: Investigation against France for excessive deficit

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The Euro remained under pressure against the Dollar, in an unreadable political climate, and it was precisely in the middle of the legislative campaign that the European Commission opened an investigation against France for excessive “deficit”. In the background, the market remains very upset by the lack of visibility, at this stage, on the color and composition of the next government, and the positioning of the center of gravity of the hemicycle.

“Fears which relate to the programs of the political blocs which are trying to form themselves…or which have just been formed”, explains Alexandre Baradez (IG France). “Fears relating to the trajectory of the debt but also to questions of regulatory change and taxation.”

The market fears that populist groups, such as the National Rally, will implement policies that would weaken France’s already shaky public finances.

“At this stage, investors are immersed in uncertainty. It must be said that none of the possible scenarios currently seems favorable to the financial markets. Indeed, while the trend in French public finances was already not particularly bright, the “The prospect of particularly wasteful programs at both extremes raises fears of the worst for French debt”, explains Thomas Giudici, head of bond management at Auris Gestion.

“It is therefore no longer surprising to now see France borrowing more expensively than Portugal and closer to Greece or Italy than to Germany,” notes the manager bitterly. “Will France, a new peripheral country, join the club of weak countries in the euro zone (PIIGS: Portugal, Italy, Ireland, Greece and Spain)? Our chauvinism is taking a hit…”

In terms of statistics, operators took note of the monthly dynamics of retail sales, below expectations for the month of May, which allows 10-year Treasury bonds to continue their decline below 4.25%. Conversely, industrial production jumped 0.9%, well beyond expectations in the United States in May. Not much to get your teeth into this Wednesday, but let’s still mention the NAHB index of the American residential market to be released at 4:00 p.m. “Business” will resume tomorrow with the monetary decision of the Bank of England and the weekly registrations for unemployment benefits across the Atlantic, and especially on Friday with a battery of

At midday on the foreign exchange market, the Euro was trading against $1.0735 approximately.

KEY GRAPHIC ELEMENTS

The currency pair recorded a double top at $1.0885 which further asserts itself as a resistance level, below which the bearish bias can regain its rights. Especially in the event of rapid reintegration of the lower part to an oblique (drawn in black), a major graphic reference point. This test is in progress, in conditions of volatility which challenge. Negative review maintained.

MEDIUM TERM FORECAST

Considering the key graphical factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).

Our entry point is at 1.0739 USD. The price target for our bearish scenario is at 1.0436 USD. To preserve the capital invested, we advise you to position a protective stop at 1.0821 USD.

The expected profitability of this Forex strategy is 303 pips and the risk of loss is 82 pips.

DAILY DATA CHART