Is EU ahead of a political storm?

The Catalan elections were carried out yesterday and the separatist parties won. The result was interpreted as a vote of defiance to Rajoy’s government but it could also be interpreted as a renewed message to the EU which backed Rajoy’s government in the post referendum period. This is only one issue that EU will have to face. Tension is also expected within EU, as the European Commission triggered a process that could see Poland stripped of its voting rights in Brussels. The process was triggered as Poland proceeded to reforms of its judicial system, which the EU Commission opposes and views as threatening to its independence. On another front, the refugee issue may be setting the basis of future coalitions within the EU about the refugee issue, with central and eastern European member states mostly having a more negative stand towards EU quotas of incoming refugees. Also on Thursday British PM Theresa May, visited Poland and media reports suggested that the British PM was searching for allies within the EU, ahead of the Brexit negotiations, undermining EU unity on the following complex subjects of the Brexit negotiations.

EUR/USD dropped during today’s Asian morning, tested the 1.1820 support line and then regained some of its losses and continued trading between 1.880 resistance level and the aforementioned support level. Should it come under buying interest, the pair could break the 1.1880 resistance level and aim for the 1.1910 resistance level. On the other hand should it come again under selling interest the EUR/USD could break the 1.1820 support level and aim for the 1.1795 zone.

First major win for Trump administration

The US tax reform passed the voting test of the Senate and the House of Representatives yesterday Wednesday and has marked the first legislative win of the Trump administration. It’s not clear when president Trump will actually sign the new tax law, but there are expectations for it to happen by the end of next week. Media reports suggest however that the new tax plan is still unpopular with voters expecting the new tax law to benefit the rich and not the middle class. Should this perception not be overturned there could be costs for the republicans in votes. On the international level as media reports suggested, Australia’s Finance minister Mathias Cormann voiced the need for
Australia to follow the US example and that the “Australian parliament passes a more competitive business tax rate”. Other media headlines report that Republicans aren’t quite sure if they have the necessary votes in the House of Representatives to avoid government shutdown on Friday, sparking new political uncertainty.

EUR/USD rose yesterday and broke the 1.1880 resistance level for a short period of time, found resistance at the 1.1900 level, surrendered any posted gains and continued to trade between the 1.1880 resistance line and support level 1.1820. Should it come under renewed buying interest, the pair could break the 1.1880 resistance level again and aim for the 1.1910 resistance level. On the other hand should it come under further selling interest the EUR/USD could break the 1.1820 support level and aim for the 1.1795 zone.

 

 

US tax overhaul gaining support, effectiveness questioned

Senator Collins stated that it will vote the tax reform adding further assurance that the bill will pass. As certainty of reform passing rises, media reports suggest that scrutiny about the effectiveness of the tax reform also increases. Tax issues arise between federal government and individual states as loopholes are found in the proposed reform. On the international aspect of the proposed tax reform, worries seem to grow in the EU as it may influence US subsidiary businesses in Europe and have a wider impact on global tax rules and even financial stability should one consider the effects on the US deficit.

EUR/USD, yesterday Monday, during the Asian and European morning rose by 98 pips, broke the 1.1820 resistance barrier for a short period of time, and later surrendered some of its gains and continued to trade between the 1.1725 support level and the 1.1820 resistance level. Should the bears take the driver’s seat we could see the pair braking the 1.1725 level and aim for the 1.1680 support zone. Should the bulls take the reins again today we could see the pair break the 1.1820 resistance level again and aim for the 1.1880 resistance zone.