German coalition deal in the balance, again

German SPD leader Martin Schulz resigned yesterday, in hope of ending inner SPD turbulence about the deal struck with CDU-CSU. The deal is about to come to a vote from SPD party base early March and the outcome seems to be in the balance. Merkel on the other side, in an attempt to appease CDU reactions for the loss of the finance ministry, promised not to allow any deficits in future budgets. On other news, the German economy seems to be doing well, despite the political uncertainty, based on strong exports and business confidence. Currently, we see the case for the economic side to overshadow the political side and support the EUR, maybe until the 4th of March, when the SPD vote results will be announced.

EUR/USD followed a similar path as cable yesterday reflecting the course of the US Dollar, by heading south and breaking the 1.2355 support line and later on breaking it again by moving upwards and continuing to trade in higher grounds. We see the case for the positive momentum to continue for the pair, however at a slower pace as the US Dollar side could stabilize. We also see the case for the pair to continue to trade above the upward trend-line incepted since the 18th of December 2017, at least for the short term. Should the pair find selling orders, we could see it aiming or even breaching the 1.2355 support line. On the other hand should cable find fresh buying orders, the pair could break the 1.2455 resistance line and aim for the 1.2600 resistance hurdle.

A speech to Unite a Kingdom

The first speech about Brexit is to be delivered today by Boris Johnson. Media reports suggest that the speech may call for unity and present Brexit not as “grounds for fear but hope”. Other headlines suggest that the UK’s border and immigration system is unprepared for Brexit, providing further uncertainty. The EU side on the other hand seems to be focusing more on inner politics, as France’s Macron concentrates on EU reforms and Germany is still struggling to form a government. We expect the speech to overshadow any other Brexit development today and its content to create a positive sentiment which could support the GBP.

Cable, as analysed yesterday moved in a sideways manner with bullish tendencies and broke the downward trend-line incepted on the 2nd of February, however failing to reach the 1.4040 resistance line. We see the case for the pair to continue to trade in a sideways manner with bullish tendencies and it could be influenced by the fundamentals mentioned before as well as the US inflation data which are to be released today. Should the pair find new selling orders, we could see it breaking 1.3750 support line and aim for the 1.3590 support zone. On the other hand should the pair come under buying interest we could see it breaking the 1.4040 resistance level.

Riksbank expected to remain on hold today

Riksbank is expected to announce it’s interest rate decision today and is expected to remain on hold at -0.5%. SEKOIS imply that the market has priced in Riksbank to remain on hold with a probability of 85%. Financial data and fundamentals support the case for the bank to remain on hold as well. Specifically, the inflation rate is currently at +1.7% yoy, below Riksbank’s target of +2.0% yoy and unemployment is at 6.0% evident of the existing slack in the labour market. On the fundamental side, Sweden maybe facing a housing bubble with Riksbank trying to achieve a “soft landing” of the prices. Hence, focus may shift to the accompanying statement and the press conference. The tone is expected to be neutral, maybe even a bit dovish. SEK could be weakened by the developments and some volatility could be expected upon the announcement of the rate decision.

EUR/SEK has been trading in a sideways manner the past few days, well between the 9.8594 support line and the 9.9716 resistance line. We see the case for the pair to trade sideways with a bullish sentiment in the short term, due to the fundamentals mentioned before. Should the bears get in the river’s seat, we could see the pair breaking the 9.8594 support line and aim for the 9.8035 support zone. On the other hand should the bulls take the reins, we could see the pair breaking the 9.9716 resistance line and aim for the 10.0300 resistance hurdle.