The Euro will face hard test

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Turkish crisis fueled investor interest in protective assets, in particular the U.S. dollar. Last Friday, the worsening of relations between Turkey and the United States triggered a sharp drop in the Euro against the dollar, causing the pair to break important level of 1.15. The economic performance of the Eurozone as a whole do not give a positive attitude, and the Turkish question only aggravates the situation.
Let me remind you, the national debt of Ankara, the countries of the Eurozone is more than $ 150 billion. Under the condition of increased economic crisis, the debt of Turkey will be considered as irrevocable and thus, will result in adverse consequences for the largest banks in France, Italy and Spain (BBVA, UniCredit, BNP Paribas). Consequences – the promise of the Euro, a huge collapse. Today was published the economic performance of the Eurozone.
It is worth noting the significant increase of economic sentiment in Germany, with 24.7 to -13.7, as well as GDP growth for the second quarter. But, as expected, should support the European currency is not provided.
On Monday the Euro/dollar showed growth, but it should be considered no more than a temporary lull, as the concern over European assets will continue to pull the Euro down. Undoubtedly, the pressure on the currency will provide the monetary policy of the fed. In his last Protocol, the regulator announced its intention to continue to raise interest rates this year.
At the same time, ECB policy looks pretty soft, and the likelihood of a rate increase, even next year, remains elusive. And, of course, their role, and importantly, the weakening of the plays a trade conflict between the United States and the European Union.
The influence of these factors is supplemented by technical indicators. W1 on the graph clearly emerges the figure of the head and shoulders. Attempt to pass the level 1.15 indicates the beginning of the testing reversal patterns. Now the price konsolidiruyutsya from the psychological level of 1.14, under the condition of breaking the price will tend to 1.08 in the medium term.
If you look at the long-term trading, the implementation of the latter goal can return EURUSD to December 2016 – 1.03, then again will be the question of parity.
The worsening fundamental backdrop will lead to a more rapid achievement of the stated objectives. At the moment, any positive for the Euro, most likely, will be perceived by the market as nothing more than a correction, with subsequent resumption of the bearish trend.
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Olga Passage
Financial analyst,
Larson & Holz