The euro/USD is about to make a short hop back towards an uptrend after the upcoming Italian election. Once the Italian Senate clears the slate for the new government, it will likely take a few days to approve any new policies. With the new Italian government is in place, this market is expected to immediately support this.
With political instability, Italy is looking to install a strong leader that can encourage economic growth and ease of the populace. After the Italian senate passes the new laws for the government, they will likely face a period of testing until the political instability subsides.
During this period, the euro/USD should pick up to a support level of around 98.0. If you are looking to get in on this swing, you need to go long of the euro-USD, but not so much long of the USD.
As a trader, you should go long of the Euro (EUR) and make sure you keep your long of the dollar because you will want to protect yourself from any currency fluctuations that may occur. Your ultimate goal is to try and buy the EUR at $1.00, or even under if you can. The main reason is that over the long haul, if you let the dollar weaken too much, you will lose more money than you would have if you held off longer.
You can go long of the euro/USD long, but bear in mind that the EUR/USD is probably not as undervalued as it seems. Keep in mind that prices will tend to bounce around a bit when there is political instability around. I have also read recent theories that all the major economies will all be reevaluating their policies and changing their internal markets.
With political instability, you should expect some of these changes and this could very well be the reason why the EUR/USD will fluctuate around between 82.5 and 86. If you are able to hold off too long, you will be hurt if the EUR starts to do well and you just can’t wait to close out your positions.
If you buy at the EUR/USD price, you should have no problem holding that position. Just be sure that you don’t let yourself take your shorts and cover too early or you will miss out on your profits.
When you want to try and get a EUR/USD position established, you are looking to get to 95.0 and this is why I tend to hold off to avoid overbuying. This is also where traders want to wait before they start buying. Don’t try to get in on this swing right away; you don’t want to jump on the bandwagon.
If you buy at the EUR/USD, you can wait to a week or two until you see how the market reacts. In most cases, you will find that the European market has already absorbed any new policies coming from the Italian parliament and you will just be waiting to see how the market moves.
Once the Italian elections are done, this will likely be the time when the market goes into a consolidation period where we expect to see the current uptrend to hold. All in all, I think the euro/USD may fall to a bottom of around 93.0, but we could easily see a rebound before the end of the year.
Now that the election is over, this long-term outlook is looking very bright. If you are looking to get in on the action, it is likely you will need to wait a few weeks before you can open your positions, but if you do, you will surely find plenty of action in the months ahead.