The US national debt topic is getting “hotter” day after day for a good reason. It’s already September, and the US Congress has to consider the increase of the maximum possible amount of the national debt until the end of the month. It will be a difficult task, which may require more time than the politicians really have.
Right after the Labor Day, the US Congress went back to work after legislative recess. Its highest priority is the 2018 budget agreement and acceptance along with the national debt issue. Earlier, Steven Mnuchin, the US Secretary of the Treasury, warned that the national debt “ceiling” should have been considered as early as in spring.
Right now, the US national debt is a bit shy of 20 trillion USD. This number is more than the country’s GDP, but it’s okay for developed economies. If the debt is serviced in due time, there won’t be any problems with it. However, in the USA, there is a legislatively accepted “ceiling” of the national debt. This year, members of the Congress have to revise it until September 29th.
There always is a chance that they won’t make it in time. On several occasions in the past, there was a real drama about it and the decision was made just several hours before the “H-hour” while the stock and currency markets were swinging. The major political difference is that the Republicans are always in favor of decreasing the load on budget expenditures while the Democrats are against. Both parties fight for every cent, but eventually come to a consensus.
Get our Weekly Commitment of Traders Report: - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.
Get Our Free Metatrader 4 Indicators - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter
By the way, the latest news says that the members of the Congress have time: Trump asked the Congress for three more months, so now the deadline is December the 5th.
Discussions about the national debt “ceiling” increase are a very delicate topic for the US Dollar. While they are discussing the topic, the demand for “safe haven” assets may increase and the USD may come under even more pressure than now.
The technical picture of the EUR/USD pair shows a stable uptrend, which indicates that the loser here is the USD. The situation is evolving the favor of the Euro. Still, the situation may change in the short-term if the price doesn’t break the high at 1.2070 reached on August 29th. However, if “bulls” succeed, the closest target will be at 1.2250, which is close to the upside border of the ascending channel. But again, if the above-mentioned high provides resistance, it may stop the impulse and start the Flat pattern with the support at the downside border of the current range. After the price finishes this pattern and breaking 1.2070 upwards, the upside target may change to 1.24. Also, one shouldn’t ignore another scenario, which implies that the pair may beak the range downwards. In this case, the support level will be at 1.19. If the price breaks this level and fixes below it, investors may close their positions, all or partially. As a result, the instrument may continue falling towards 1.1550.
Author: Dmitriy Gurkovskiy, senior analyst at RoboForex
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.