EUR/USD: Rich geopolitical, customs and political news

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The Euro is getting a little oxygen with the announcement of a government just as the Dollar suffered a small correction with the threat of new customs duties brandished by D Trump.

On French politics, the rapid announcement of a Lecornu 2 government rules out, at least for the moment, the hypothesis of a return to the polls.

“If the markets do not show panic, the rise in long-term rates reflects a clear expectation: that of a credible budgetary trajectory. The challenge is now twofold: stabilizing the budgetary trajectory to restore market confidence, while freeing up political and financial space to address the real drivers of long-term growth — reindustrialization, competitiveness, employment…”, summarize the economists. of Asteres.

Mr. Lescure remains at the head of Bercy and Ms. de Monchalin in public accounts. Note the notable entry of M Farandou, boss of the SNCF, into the Ministry of Labor. An explicit signal for the markets, for a possible renegotiation of the pensions file…

“But a lasting easing of the risk surrounding France on the financial markets seems improbable because the initial problem, before the political instability, was that of the budgetary trajectory with an unsustainable deficit. And a temporary suspension of the pension reform would not provide any concrete solution from this point of view. It would only shift the problem.” analyzes Alexandre Baradez (IG France).

Remember that Moody’s will update its rating on France (Aa3) on October 24 and Standard & Poors (Aa-) on November 28.

Bruno Colmant, member of the Royal Academy of Belgium, takes the high ground and wants to be alarmist about the dangers that the French political and budgetary situation poses to the monetary union. “Behind the French government catastrophe, and the realities of a new dissolution or, what would be preferable, a resignation of the French President, there is of course the deterioration of the French public debt, but also – because no one says it – the euro.”

“But how long will a currency cease to be unique if France enters a deep period of political indecision, and certain sovereignist parties, such as the German AfD, which will certainly be in power before the end of the decade, endanger monetary cohesion?”

In terms of statistics on Friday, currency traders learned of a stabilization of the consumer confidence index (U-Mich) in preliminary data at 55 points.

On the political front, the peace agreement between Hamas and Israel is entering the hostage release phase. 48 of them, including 20 still alive, must be handed over to the Jewish state this morning.

At midday on the foreign exchange market, the Euro was trading against $1.1620 approximately.

KEY GRAPHIC ELEMENTS

The bullish oblique that prevailed until now (in black on the chart) is now broken, with a confirmation pullback. The negative view is offered under this oblique, while the relative strength index collapses. The 20-day moving average (in dark blue) is about to break the trajectory of its 50-day counterpart (in orange) at a significant angle.

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 1.1615 USD. The price target for our bearish scenario is at 1.1013 USD. To preserve the invested capital, we advise you to position a protective stop at 1.1751 USD.

The expected profitability of this Forex strategy is 602 pips and the risk of loss is 136 pips.

DAILY DATA CHART