Moldovan Leu Strengthened After the New Government Took Office

... following the articles "What evolution will the Moldovan leu have against the euro? Chart analysis" from 17.04.2019 and "Confirmation of the Moldovan leu depreciation" from 03.06.2019

The Situation Has Changed

After the first article from April 17, 2019, the Moldovan leu did indeed show weakness, and over the following two months the EUR/MDL currency pair developed an upward trend. But what happened in Moldova on June 8, 2019 was probably expected by no one: the new Government of the Republic of Moldova was elected, led by Prime Minister Maia Sandu, and roughly a week later the Filip Government and the PDM regime fell. From that moment, the fate of the Moldovan leu took a new direction...

The Moldovan Leu Gained Strength

So, with the approval of the new Government of Moldova, the probability increased that Moldova could follow a more correct and efficient path. As a result, the level of confidence and the appetite of foreign investors may rise, while external financing has already been unlocked. The Moldovan leu therefore suddenly started moving toward appreciation. Since June 14, the EUR/MDL quote has fallen from 20.40 MDL to the current 19.55 MDL (4.5% over two months).

What Are the Expectations?

One obvious point is that the economic development of a country involves a complicated, long-term process, and many factors along the way can affect the strength of the national currency. At the moment, the change in the country's governance system will probably offer greater chances for the development of Moldova's economy, and this factor must be taken into account.

As for chart analysis, we can certainly note one thing: in the image above we can see that the EUR/MDL chart has just tested, and slightly bounced from, the support line of the upward trend. This trend has already lasted one year and can still serve as the foundation and starting point for an upward trend lasting several years (depreciation of the leu), BUT, considering the political changes in the country, this scenario is already becoming less interesting.

We would like to draw your attention to the fact that, from a technical analysis point of view, a downward breakout of this channel could significantly increase sellers' appetite. This means that the EUR/MDL quote would have a clear path to the next obstacle, namely the 18 and 17 MDL area for one euro (see the image below). This moment is very important and requires monitoring!

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The information in this article is not and cannot be considered a recommendation to buy, sell, or hold any specific financial instrument. The chart analysis was created using the websites investing.com and tradingview.com.

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