EUR/USD slam dunked by 70 pips by bears on Merkel's efforts failing
|- EUR/USD dumps in the Asian session on Monday due to politics not going so well for Merkel.
- EUR/USD takes out key mid rage point of 1.17 handle.
EUR/USD has started out the week slammed dunked by the bears on the back of the German news where Merkel's efforts on forming the four-party government have hit a roadblock. The FDP has reportedly just walked out of Germany's coalition talks which would lead one to speculate that her fourth term is now under threat and hence a drop in the euro at the start of this week. EUR/USD opened at 1.1785 and made a high of 1.1798 before crashlanding to 1.1739 on the news.
Elsewhere, the euro did find some support on the WSJ report over Mueller and Trump's subpoena. On Friday, EUR/USD rallied to the hourly cloud top at 1.1800 the pair offered choppy trading action for NY's session where bulls were unable to capitalise fully on dollar weakness.
Also, risk appetite was soft on the session amid the subpoenas on Trump’s campaign and continued uncertainty over the US tax bill while markets need clarification instead of speculation. Last week, the US House voted 227-205 to overhaul the tax code. 13 Republicans voted no. However, the Senate Finance Committee's vote on tax reform will not take place until after Thanksgiving though, (Thanksgiving is 23rd November), and that is where things could all fall apart, weighing on the greenback and stock markets. For the week ahead, starting on Monday, markets will turn tot he economic calendar and Germany's Oct PPI that is forecasted to perform a rise of 0.3% m/m vs prior 0.3% while y/y is forecasted to rise 2.7% vs prior 3.1%.
EUR/USD levels
Technically, long-term sticks remain bullish on the monthly chart with the price still above 1.1700. The long upper wicks on the daily candles and the inability to hold in the daily cloud weigh on near-term sentiment for the pair. The 10-D SMA still exerts a bullish influence as it moves up through the 21-D SMA while the 100-D DMA at 1.1746 and the midpoint of the handle could be a fragile support ahead of 1.1720.
Valeria Bednarik, chief analyst at FXStreet explained that the pair is also struggling around the 23.6% retracement of its latest bullish run. "Shorter term and according to the 4 hours chart, the outlook is neutral-to-bullish, as the price settled around a bullish 20 SMA, which converges with the mentioned 23.6% Fibonacci retracement, while the RSI hovers around 59, while the Momentum tries to re-enter positive territory, heading higher right below its 100 level."
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