EUR/USD: Will France join the PIIGS?

A barometer of the appetite for risk on the financial markets, the euro remained under pressure vs the USD, since the announcement of the dissolution of the National Assembly by Macron following the results of the EU elections. Enough to plunge the financial community into doubt as to the potential impacts of a change of majority (or an absence of majority) on the public finances of the 2nd economic power in the eurozone.

"At this stage, investors are immersed in uncertainty. It must be said that none of the possible scenarios currently seems favourable to the financial markets. Indeed, while the trend in French public finances was already not particularly bright, he prospect of particularly wasteful programs at both extremes raises fears of the worst for French debt", explains Thomas Giudici, head of bond management at Auris Gestion.

"It is therefore no longer surprising to now see France borrowing more expensively than Portugal and closer to Greece or Italy than to Germany,? notes the manager bitterly. "Will France, a new peripheral country, join the club of weak countries in the euro zone (PIIGS: Portugal, Italy, Ireland, Greece and Spain)? Our chauvinism is taking a hit..."

Forex traders will note that the market will remain closed on Wednesday (Juneteenth - the day commemorating the end of slavery). They will also note that on Friday, a highlight is planned with the publication of barometer indicators of PMI activity (surveys of purchasing managers) in Europe and in the United States. Click here to read the different consensuses.

Right now, the EUR/USD is trading at $1.0742.

KEY CHART ELEMENTS
The currency pair recorded a double top at $1.0885 which further asserts itself as a resistance level, below which the bearish bias can regain its rights. Especially in the event of rapid reintegration of the lower part to an oblique (drawn in black), a major graphic reference point. This test is in progress, in conditions of volatility which challenge. Negative review maintained.

MEDIUM TERM FORECAST
Considering the key graphical factors that we have mentioned, our opinion is negative in the medium term on the EUR/USD.

Our entry point is at $1.0711. The price target for our bearish scenario is at $1.0436. To preserve the invested capital, we advise you to position a protective stop at $1.0801.

The expected profitability of this forex strategy is 275 pips and the risk of loss is 90 pips.