FX.co ★ EUR / USD: Is impeachment so terrible as it is "drawn"?

Over the past three days, the bears of the euro/dollar pair have been trying to gain a foothold in the ninth figure and each time, it is unsuccessful as buyers return the price to the 10th figure. Even so, they do not have enough strength for further growth. As a result, the pair continues to trade flat in the range of 1.0950-1.1080. The fundamental picture for the pair this week is not full of important events. Although, there are "loud" headlines in the American press today that can subsequently affect the dynamics of EUR/USD pair.

We are talking about another attempt by the Democrats to remove Donald Trump from his post in impeachment. This is far from the first attempt. In the three years of his tenure in power, the opposition has repeatedly raised this issue (for various reasons) but ultimately failed. Although the fact of previous failures does not mean that the Democrats are doomed this time to a similar result; a few facts are worth recalling.

Firstly, a similar situation occurred in the spring of 2017. Then, the word "impeachment" in relation to Donald Trump was first spoken in the walls of the US Congress. Texas Democrat Congresswoman Al Green called for a "hindering justice" process. This is a conversation between Donald Trump and James Comey, who at that time was the head of the FBI. During this meeting, the president allegedly demanded an end to the investigation against his adviser Flynn. After lengthy proceedings, the opponents of the American president failed to prove the accusation. There was no record of this dialogue, after which the impeachment issue itself came to naught.

The current situation has a significant difference. Let me remind you that the Democrats accuse Trump of exerting pressure on the President of Ukraine Volodymyr Zelensky. According to some media reports, the US president allegedly announced the freezing of military assistance to Kiev, saying that it was ready to defrost it in exchange for the resumption of investigations in Ukraine against the son of US presidential candidate Joe Biden. Unlike a simple dialogue, this telephone conversation can be reproduced in the form of a transcript. Congress has already demanded that this transcript be provided and Ukraine has given permission to the State Department to publish a transcript of this telephone conversation. That is, the only question now is whether Trump really exercised any pressure on Zelensky and whether this dialogue will "pull" the real impeachment.

It is worth noting that this is not so simple. According to US law, any representative of the House of Representatives can initiate the issue of initiating an impeachment procedure. However, this process is multi-stage -after submitting the relevant application, it is considered by the Legal Committee of the lower house of Congress. If they consider the allegations to be justified, a simple majority of those who voted will submit them to the Senate. But at this stage, impeachment should be approved by two-thirds of the senators. It is worth noting that in the entire history of the United States, not a single president lost his position by impeachment. The Lower House approved this procedure twice (once in 1868, the second already in our time, regarding Bill Clinton) but in both cases, the Senate did not support this decision.

Thus, high-profile headlines about the beginning of the impeachment procedure can have a short-term effect on the dollar. Since the procedure itself is not yet impeachment, but rather an investigation by Congress. Following which, the parliamentarians of both houses should approve further steps in this direction. Here, it is necessary to remember that a presidential election in the United States will be held in a year. Therefore, this situation can also be considered from the point of view of political PR.

In other words, the issue of impeachment is unlikely to be on the agenda of EUR/USD traders for a long time. The foreign exchange market is waiting for the main event of the fall, which will take place in early October. We are talking about the next round of talks between Beijing and Washington. The EUR/USD pair now ignores current macroeconomic statistics, allowing only relatively small fluctuations within the flat. Yesterday in Germany, very good IFO reports were published. However, in the United States, the indicator of consumer confidence turned out to be worse than expected, reaching 125 at a growth forecast of 131 points. Also, the Fed-Richmond manufacturing index completely collapsed into the negative area, contrary to growth forecasts. Although, these releases provoked only market noise as traders are in no hurry to draw hasty conclusions.

All of these suggest that the pair will continue to trade within the wide-range flat: the bears will still test the support level of 1.0950. In turn, buyers will return the pair to the borders of the 10th figure. It will be possible to speak about the further development of the downward trend only if the pair consolidates below 1.0950, heading to the base of the ninth figure.