Forex Analysis & Reviews: 14.07.2022

Live Chat

InstaForex - Official partner of Dragon Racing

This section features the most important information about trading with InstaForex. We provide both analysis from leading experts for experienced traders and articles on trading conditions for beginners. Our services will help increase your profit potential.

Become Trader

Account Opening

See also

Trading Conditions

Forex Analytics

Charts

This section is designed for those who are just starting their trading journey. InstaForex educational and analytical materials will meet your training needs. Our experts' recommendations will make your first steps to trading success simple and clear.

Start as Beginner

How to start trading

Useful information

Training and recordings

InstaForex innovative services are an essential element of productive investment. We strive to provide our clients with advanced technical capabilities and make their trading routine comfortable as we are recognized as the best broker in this regard.

Become Investor

PAMM System

ForexCopy System

Passive investments

OYS account

Partnership with InstaForex is beneficial and top-tier. Join our affiliate programs and enjoy bonuses, partner rewards, and the possibility to travel with the team of the world-renowned brand.

Become Partner

Main Page

Partner Area

Advantages for Affiliates

Registration

This section contains the most lucrative offers from InstaForex. Receive bonuses when topping up an account, compete with other traders, and get real prizes even when trading in a demo account.

All Promo Campaigns

Bonuses

Contests

Events

Holidays with InstaForex are not only pleasant but also useful. We offer a one-stop portal, numerous forums, and corporate blogs, where traders can exchange experiences and become successfully integrated into the Forex community.

Full details

Forums

We are in social networks

Forex humour

Forex Portal

InstaForex is an international brand created in 2007. The company provides services for online FX trading and is recognized as one of the world's leading brokers. We have won the trust of more than 7,000,000 retail traders, who have already appreciated our reliability and focus on innovations.

Learn More

History

Why Choose Us

InstaSport

Regulation

Company News

Awards

InstaForex Stars

InstaForex Offline

Headquarters

Key documents

Social Responsibility

InstaForex - Official partner of Dragon Racing

14.07.2022 11:47 PM

Euro choked by Italy

Trouble doesn't come alone. In addition to the energy crisis, increased risks of a eurozone recession, and an increase in the number of COVID-19 infected in the eurozone, another problem has been added for EURUSD bulls. Another political crisis may break out in Italy, which will become another headache for the European Central Bank in the decision-making process on the speed of raising the deposit rate.

The third economy of Europe, even at the time of the creation of the currency bloc, caused fears in Germany. A debt-ridden country could become the destroyer of an entire community that had to live by its own rules. Too tough for Rome. A lot of water has flowed since then. In Italy, ten prime ministers and 14 governments have been replaced. It would seem that the coming to power of ex-ECB head Mario Draghi, before whom the whole of Europe bowed its head, was supposed to stabilize the situation. So it was at first.

Nevertheless, as soon as the main coalition partner, the Five Star Party, refused to support the prime minister's proposal to provide subsidies to enterprises affected by rising energy prices, Draghi's fate hung in the balance. He threatens his resignation, which causes a wave of panic in the financial markets. The yield spread of 10-year Italian and German bonds, a key indicator of political risk in Europe, is soaring up, which in the past had a negative impact on EURUSD.

Dynamics of the Italian and German bond yield differential

Naturally, the ECB should intervene. But if it fails to cope with the task of closing spreads or goes too far with a rate hike, or a political crisis breaks out in Italy, including early parliamentary elections, the euro will continue its protracted peak against the US dollar.

In fact, the regional currency faced all the problems at once, including the devaluation of 1999, the financial crisis of 2008, Greece's intention to withdraw from the eurozone and the pandemic of 2020. Should we be surprised by the collapse of EURUSD? Especially since the US dollar, with its aggressively anti-inflation Federal Reserve, is so strong.

Scenarios for the growth of Italian public debt

It is clear that the weakening of the euro is not at all what the ECB wants to see. Not only does it contribute to the acceleration of inflation due to the rapid rise in import prices, it also aggravates the energy crisis. Enterprises have to pay more for gas, their costs are rising, their incomes are declining.

To solve the problem, the central bank has two options: either start raising the deposit rate more aggressively than currently expected, or use foreign exchange interventions. The last time the ECB intervened in the life of Forex was at the end of 2000, when the euro was worth $0.85.

Technically, on the 4-hour EURUSD chart, after a clear development of the strategy presented in the previous article, the Expanding Wedge pattern begins to form. A necessary condition is the bears' inability to take quotes below 1 for a long time. We sell on a breakout of 0.9995, when the pair returns to 1.01, we buy.

You have already liked this post today

*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.