There is a lot to digest from the shocking assassination attempt on former President Donald Trump over the weekend, with US politics, which was already very divided, now marred with violence, said Rabobank’s senior FX strategist Jane Foley.
“Market pricing can only respond in a binary manner and, for the markets, the complexities of the US political backdrop have boiled down to the assumption that the weekend events will lead to an increased chance of Trump winning the November Presidential election,” said Foley.
“That said, market expectations of a September Fed rate cut have been growing over the past couple of weeks.”
“The recent focus of US politics, though, has been on the divisions within the Democrat party and specifically on the pressure on President Biden to drop his bid to retain the White House this year.
“The assassination attempt has triggered a round of accusations that the Democrat campaign has been too focused on criticising Trump. There is still plenty of time for the pressures on Biden to grow.”
The Rabobank analyst added that France’s budget concerns are also weighing on the Euro.
“Despite the relief that the second round of France’s parliamentary elections last weekend saw the far right pushed into third place, a considerable amount of uncertainty about the country’s budget remains,” said Foley.
“We see risk that this will weigh on the Euro medium-term. Since this could coincide with a fading of Fed rate cut hopes, we see scope for further dips in EURUSD potentially to 1.05 on a 3-to-6-month view.”
EURUSD trades with negative bias below one-month peak
The EURUSD pair attracted some sellers on the first day of a new week and for now, seems to have snapped a three-day winning streak to over a one-month peak, around the 1.0910 area touched on Friday.
Spot prices currently trade below the 1.0900 mark amid a modest US Dollar uptick, though any meaningful corrective decline seems elusive.
From a technical perspective, the path of least resistance for the EURUSD pair is to the upside amid dovish Federal Reserve expectations.
Some follow-through buying beyond the 1.0910-1.0915 area mark will reaffirm the constructive outlook and lift EURUSD to the next relevant resistance near 1.0960-1.0965.
The momentum could extend beyond the March peak, around the 1.0880 area, and allow spot prices to reclaim the 1.1000 psychological mark for the first time since January heading into the European Central Bank meeting on Thursday.
(Source: OANDA)
