EUR/USD: focus on German elections

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German voters are called to the polls this Sunday, February 23 to renew the equivalent of our National Assembly, the Bundestag. This recomposition of the political forces present will give the dominant color of the next coalition leading to govern the first economic power of the euro zone, whose economic model is cracked.

Lowie DEBOU, fixed in Fund Manager at DPAM thus presents the issues: “Elections holding is a usual fact, however, this time, they do not take place in the same way. Indeed, it is not That the second time since the fall of the Berlin Wall that early elections have taken place in Germany, but it is mainly because the fundamental economic model of Germany needs to be radically altered. “

The German industry, erected as a model, although still powerful, has lost its superb in recent years, during which “the main pillars of the Germany growth model have been more and more weakened. This model rested On a globalized and secure world, where exchanges were relatively free. affected Germany. “

What to expect, therefore, of these elections which are anticipated, to get out of a major political crisis?

Kim Catechis, head of the investment strategy for the Franklin Templeton Institute thinks that “the greatest hope of the markets seems to be that the next German government will finally reform the rule of debt to debt which was created during the global financial crisis In 2009 to guarantee the country’s financial stability. To say that it is insufficient to meet the growing investment needs of Germany. “

It was this “golden rule” that imploded the coalition still in power for a few days.

“Political proposals suggest a certain reform of the debt brake, even if it will probably not be as ambitious as the financial markets would like. It is likely that a special funds are created to quickly finance increased expenses In defense, infrastructure and energy. will take time before seeing the concrete effects, probably from 2026. “

There is therefore material to see there, if necessary, a catalyst in favor of the euro, in full deconfitting against the dollar supported by its difference in “yield”.

“Historically, the German elections did not have a major impact on the value of the euro, whatever their result. The attention of the markets is almost exclusively on the potential reform of the debt to debt, which Requires a majority of two thirds in the Bundestag. However, if other reforms (defense and energy security financing) are implemented, they could strengthen the European currency. “

In the statistical chapter, the very first estimates of activity barometers in the euro zone emerged under the expectations for services (50.7) and above for industry (47.3). To follow equivalent data for the United States at 2:30 p.m., as well as the revised data of the consumer confidence index across the Atlantic, at 4:00 p.m.

At midday on the foreign exchange market, the euro was treated against $ 1,0470 approximately.

Key graphics elements

The continuous 50 -day (in orange) mobile average constitutes a solid technical and graphic barrier. In the shorter term, it is even his counterpart at 20 days (in dark blue) that officiates as a dynamic resistance. And this without the RSI oscillator positioning itself in the occurrence zone. In the immediate future, the pair of currencies traces, in the upper part of the Bollinger bands, a negative structure in harami. Once the parity is perfect, namely $ 1 for a €, an energetic buyer of protest can then be set up.

Medium term

In view of the key graphic factors that we have mentioned, our opinion is negative in the medium term on Euro dollar parity (Eurusd).

Our entry point is 1,0467 USD. The price of course in our lowering scenario is 1,0001 USD. To preserve the committed capital, we advise you to position a protection stop at 1,0611 USD.

The profitability hope of this Forex strategy is 466 pips and the risk of loss is 144 pips.

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