EUR/USD Forecast: no political troubles in Germany

The common currency started had a rough beginning of the week, as talks for a coalition government in Germany ended on Sunday after the Free Democratic Party pulled out. Merkel’s CDU has now been sentenced to a minority government, because another coalition is unlikely, or to call a snap election. The EUR/USD pair declined to 1.1722 at the beginning of the Asian session but lowered its early losses at an early stage as current governmental problems will hardly affect the German economy.

European stocks fell into the opening but slowly recovered ground. German DAX reached more than 100 points more than the intraday’s low level and is still red, but the EUR/USD has regained the 1.1800 mark.

In the macroeconomic calendar, ECB’s Draghi will talk on the Economic and Monetary Affairs Committee of the European Parliament about the economic and monetary policy where he is likely to be asked on the recent decision of the Central Bank, mention better inflation and employment improve, thus giving further impetus to EUR.

Technically, the pair is trading on Friday’s 1.1800 high, after briefly going down to 1.1745 in the last two week’s rally, following a 38.2% retracement, but has returned to the upper end of the range, some pips above the 23.6% retracement of the rally. In the 4-hour chart, the pair is above the 20 SMA and remains around 1.1785 while the technical indicators rised vigorously and returned to a positive area, turning the risks to the upside.

A strong, static resistance, however, comes at 1.1820/30, where the pair halted by the end of last week. In addition, the pair can reach 1.1890 for up to 1.1860, where it has been sold several times in October. This 1.1745 Fibonacci support has become a key short-term since a break below should favor a new leg lower past the mentioned daily low and toward 1.1705.

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