Austria, Italy Elections Put Euro ETF in the Spotlight

“If new elections need to be called in 2017, traders will be watching the anti-establishment 5 Star Movement party which has strongly supported Italy leaving the Eurozone. With upcoming 2017 elections in France, The Netherlands, and Germany, the Eurozone is likely to be quite volatile for the upcoming year,” said OptionsExpress.

In the near-term, the euro could also be imperiled by the Federal Reserve moving forward with its first interest rate hike of 2016 later this month. If the Fed hikes rates, the exchange value of the U.S. dollar will strengthen, or foreign currencies will depreciate relative to the greenback. Consequently, a non-hedged international investment will experience lower U.S. dollar-denominated returns.

SEE MORE: Europe ETFs Surprise After Weekend Elections

Renzi’s resignation could lead to early elections and a rise in support for the populist anti-euro Five Star Movement. The party would seek to carry out a referendum on Italy breaking away from the Euro area.

Regarding the euro’s technicals, “The 20-day simple moving average (SMA) is providing resistance which is being tested with today’s trading. However, the bearish trend is still seen as the 20 day SMA is way below the 50-day SMA, and the slope of the 20-day SMA is quite steep to the downside. 14-day RSI is a neutral 46.50,” notes OptionsExpress.

For more information on hedged options, visit our currency hedged ETFs category.