The Euro Should Remain Bearish as Italy Heads Towards New Elections
Skerdian Meta • 1 min read
EUR/USD has been on a bearish trend for more than a year and the trend continues to develop as this pair keeps making new lows. The fundamentals for the Euro keep getting worse every week, so I suppose the Euro will remain in a bearish mode for months to come as the European Central Bank prepares to launch another stimulus package soon.
Last Friday we saw a jump in EUR/USD, but that was due to the escalation of the trade war which messed up markets. Although, the Euro has more reasons to remain bearish, such as politics. Brexit is a risk for the Eurozone and now the Italian politics are back in spotlight.
The Prime Minister Conte has resigned and the coalition parties are moving away from each other. A while ago we heard that the Five Star party (Cinque Stelle) would halt coalition talks unless PD commits to appointing Conte as premier. He are a couple of comments according to a Democratic Party (PD) official, cited by Bloomberg:
- Talks may fail over Di Maio’s Cabinet ambitions
- Leadership meeting delayed to Wednesday morning
So it seems that the proposed coalition between the Five Star and the Democratic Party is falling apart before coming to life. This leaves us with the scenario of new elections which should be negative for the Euro. So, I am planning on shorting EUR/JPY since the pressure is to the upside for the JPY, despite yesterday’s climb in USD/JPY.