Euro and pound: Burning [Video]

(Ipek Ozkardeskaya – Swissquote Bank Ltd)

The FX markets kick off the week on an extremely chaotic note. Both the pound and the euro are being severely punished for the political decisions that are taken in the UK and in Italy respectively.

As expected, the far-right candidate Giorgia Meloni won a clear majority in Italy at yesterday’s election, with Brothers of Italy gaining more than 25% of the votes. And Meloni’s right-wing alliance with Salvini’s League and Berlusconi’s Forza Italia got around 43% of the votes: the terrible consequence of the pandemic, the war and the energy crisis.

The EURUSD has been shattered this morning. The pair dived to 0.9550.

But it’s almost worst across the Channel if that’s any consolation. Investors really hated the ‘mini budget’ announced in UK last Friday. Investors were expecting to hear about a huge spending package from Liz Truss government, but the package has been even HUGER than the market expectations.

UK’s 10-year yield jumped more than 20% since last week, the FTSE dived near 2% and Cable tanked below 1.0350 in Asia this morning.

Elsewhere, the US dollar index took a lift, and the dollar index is just crossing above the 114 mark at the time of talking.

Gold dived to $1626 on the back of soaring US dollar.

US crude oil plunged below $80 per barrel.

The S&P500 fell to the lowest levels since this summer, whereas the Dow Jones fell below the summer dip.

Happily, the European equities are better bid this morning, but investors remain tense and worried.

EUR/USD: Quick reaction after execution of stop loss orders

(Vasilis Tsaprounis – TopFX)

The common European currency was in free fall of more than 100 points at the Asian opening time as major stop loss orders were executed.

The euro having already fallen below 0.9700 levels during Friday after coming under significant pressure in the wake of the growing geopolitical tension after President Putin’s decision on partial mobilization of his reserves army.

Failing to show signs of reaction on Friday the European currency found itself at the Asian zone to take another major dip . At the levels of 0.9550 there was a quick and immediate reaction resulting in the pair returning to 0.9700.

At the opening of the market in the Asian zone there was no new development or any new macro news , so this sharp drop it was nothing but the execution of stop loss orders.

Although conditions continue to weigh on the European currency i believe that the decline we have seen in recent days and in particular the new lows in the Asian zone include a temporary limit of excess.

The announcement of the Ifo index for the German economy which is lower than expectathions capture the extent of the energy crisis problem in the German market.

While a little later we have the speech of the President of the European Central Bank Christine Lagarde and some comments about the current levels of the exchange rate maybe they will increase the volatility significantly and support a further reaction of the euro.

It is the first time in several months that the single European currency has failed to react in the first time after plunging to new lows on Friday but it did today so even with a small deviation the pattern of reactions after the dips does not seem to changed.

For this reason i will stick to the basic strategy by take long positions in favor of the euro after the new dips anticipating increased volatility in both directions.

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