EURUSD –Portugal w/o government, might ask for aid
Portuguese parliament didn’t accept austerity measures proposed by the minority government leading to a resignation of the PM and most likely to early elections within next few months. This failure, given a dire economic and fiscal situation, will likely force the Portuguese to ask for a bailout as the government faces bond redemptions of nearly 5 bln EUR in mid April and some 8,5 bln EUR in mid June. While this outcome was expected by many it still carries a downward potential for peripheral bonds, the euro and – possibly, emerging currencies from Central Europe as well.
Could the Portugal end a trend on the EURUSD? This is not unlikely for two reasons:
a) The pair failed to move above the key 1,4280 level – we pointed at the importance of this level on Tuesday – it’s not only a local high from Nov’10 but breaking it would send strong bullish technical signals for the pair (and conversely, a failure to do so might signal weakness)
b) We have been pointing for a while at excessive expectations regarding future interest rate hikes in the euro zone; a renewal of debt worries would likely temper those expectations and exert a downward pressure on the pair
However, technically we need the pair to move below a local high from March 7th (1,4035) and break a trend line (currently at around 1,3980) – at the very least – to signal a possible reversal. A confirmation would come should the pair break a support at 1,3860.
DAX30 – struggling with a resistance
More troubles in Portugal is not what the bulls on the German market wanted to see as they have been trying to move above the key resistance 6845 pts for the DAX30 futures. The longer the contract fights with this level, the stronger a subsequent move should be.
Events to watch – US data and EU summit
The key macroeconomic releases are coming from the US today at 8.30 ET (13.30 CET) including claims (consensus 385k) and durable orders (consensus +1% m/m and +1,5% for the core). Earlier in a day there are flash PMIs in the euro zone (3.58 ET, 9.58 CET), however when it comes to Europe, investors will be awaiting different news – namely, any messages from the EU summit in a fresh Portuguese context. Optimism from early March might be dealt a blow as politicians brace for elections in Portugal and Finland (parliamentary) and Germany (local ones, on Sunday).
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Przemysław Kwiecień PhD, Chief Economist |
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Disclaimer, investment risk warning
X-Trade Brokers Dom Maklerski S.A. does not take responsibility for investment decisions made under the influence of the information published on this website. more
