The political face of the European economy. Elections of Germany and Italy; their impact on the single European currency. Weekly review of the EUR/USD pair.

Good afternoon, dear and highly respected traders, investors and other residents of the international financial world. With you, an analyst, trader and amateur who likes talking about the exchange trade Andrew “Golden Eye” Green.

Today and on the agenda of this week the results of the elections in Italy, the political decision on the coalition in Germany, in short, everything that shapes and hurts the current movement of the main European quotation EUR/USD.

Of course, the analysis of any currency pair is the study of the factors affecting the economic state of both countries participating in the paired confrontation. And here, for a more careful study of the situation with the USD, it is worth familiarizing with the weekly review published on Monday on futures for the US dollar index.

And in this article, we will take a closer look at the features of this week for a single European currency.

Let’s start, perhaps, with Angela Merkel and her next, already the 4th, in terms of time, in power and behind the wheel of the “German economic cruiser”. On the weekend, the coalition of the Christian Democratic Union and the Socialists of Germany confirmed their further desire for cooperation, thereby prolonging Angela Merkel’s further stay as Chancellor for another 4 years. It can not be said that there will be light four years, but the manifestation of such stability in the political life of Germany creates substantial support for the stability of the economic platform of the European Union. In the company with Emanuel Marcón (the President of France), which is also more focused on preserving the European Union and further mutually beneficial integration, Angela Merkel will be able to adequately withstand the “schismatic” sentiments in Spain, Italy and some other EU member countries.

But in this barrel of honey, to support the Euro, a huge spoonful of tar appeared on these days in the face of the results of the elections in Italy, where the ruling pro-European party in fact lost to the centrists and populists, in the person of the Silvio Berlusconi party and the “dark horse” of Italy’s political arena – the party “Movement of Five Stars” (Movimento 5 Stella – M5S). These parties have extremely leftist sentiments with loud statements in support of the lifting of economic sanctions against the Russian Federation, and are harsh critics of the current economic and political development vector of the European Commonwealth.

 In a word, the process started, and it would take a long time to disentangle it).

How it threatens the Euro, it is difficult to say. I tend more to such uncertainty as to the negative factor. But, with the beginning of the week, the current dynamics of the Euro is more inclined to not notice the negative prospects of the current situation, but hopefully it will not become simply delay of the moment in the future.

Now let’s go directly to the charts and taking into account the fact that the winter has passed and the spring is on the threshold, we’ll start, perhaps, with the monthly timeframe (Figure 1).

As we can see, the pair, moving into confident lateral movement, gradually shifts to the resistance line of the downward trend channel of 2008. And I think that it is the zone 1.2700 that will be the rubicon around which will be all the focus for the whole year.

We go further and in Figure 2, we can consider more closely the daily timeframe.

Here we have four main levels and the most promising and the only one of them is the resistance level at 1.2500. Here, even mid-term options for sales will be very attractive. In turn, the options for medium-term purchases start only from the bottom support at 1.1600, while the levels 1.2000 and 1.2200 – only for short-term trading with benchmarks to 50-80 bp on the takeprofit.

For analysis and recommendations in the intraday mode, let’s move on to H1 and the graph in Figure # 3.

The upward trend looks very good from the beginning of March, which does not yet show signs of weakening, so its potential for movement to 1.2500 is very likely. And I can stress the sales from 1.2500.

Recommendations:

In turn, for the aggressors I recommend to consider the option of selling from the current. More conservative purchase should be oriented at 1.2200, again for aggressors – the recommended start at 1.2300.

Examples of transactions:

• conservative option:
  SELL limit 1.2500, SL 1.2560, TP 1.2410,
  BUY limit 1.2200, SL 1.2140, TP 1.2280.
• aggressive option:
  SELL (current) 1.2400, SL 1.2450, TP 1.2320,
  BUY limit 1.2310, SL 1.2260, TP 1.2380.

Do not try to be smarter than others, just be richer.

Andrew Green