The single currency could extend its recovery versus the greenback today to be trading currently close to 1.2140 which is its highest reached level since the end of 2014. As EURUSD could resume today its creeping pushed by released news about reaching outlines for forming grand coalition between Angela Merkel’s CDU/CSU and her former coalition partner SPD party. The markets will be waiting ahead in the coming weeks for more details about that renewed coalition which can bring back confidence in the political stability in Germany. After that skeptical which lasted for more than 3 months in Germany, This breakthrough can pave the way now for ending the uncertainty about the German political situation.
EUR has been already boosted following the release of the recent ECB meeting minutes which underscored the governing council members' interest in providing gradual guidance to tighter Monterey policy. The ECB looked confident more than before in the economic recovery and the inflation upside risks in EU which can warrant tightening of the credit conditions, after an era of fighting the deflation pressure on the prices.The ECB minutes could underpin the Germane governmental bunds yields curves making the single currency much more attractive. The germane 10 years bund yield started the new year close to 0.43% and now it is near 0.60% gaining about 25%, while the money markets are waiting now for information about Germany fiscal plans. As Merkel promised of retaining in office the Finance Minister Wolfgang Schaeuble who wants to keep the governmental fiscal surplus every year until 2020 showing less probability of imposing new reflation plans in Germany. Wolfgang's view can support the germane Bunds prices and lower their yields by sustaining the fiscal situation of the germane government, but in the same time he can cap the germane equities holders from having new reflation boost in the coming years.
While The SPD candidate Schulz was looking for boosting the economy further by new reflation plans Schulz has promised to cut taxes for anyone earning less than €60,000 and also to reduce the social security contributions for those who earn up to €15,000 a year. but he was eager to raise taxes for top earners in the same time to finance spending €30 billion more on public investments by 2021.
The money markets have already lived exceptional days this week, after starting it with Bank of Japan decision to scale back its monthly long term JGB purchases. BOJ said that it will cut its purchases of 10 to 25 years bonds to ¥190b from the ¥200b and also its purchases of more than 25 years bonds to ¥80b from the ¥90b previously.This action drove The 10 year Japanese governmental yield up to 0.07%, as it has been read as the first sign in the way of normalizing BOJ monetary policy since 2012.
China has had also a strong role in raising yields in the money markets this week by sparking concerns about its US treasuries purchases in the future, as the news came from China to refer to potential scaling back or halting of these purchasing on recommendation from senior officials.These news could hurt the US creditability amid the current reflation plans and tax overhaul which are in need for financing.UST 10yr yield rose up to be at 2.55% currently, after starting the year close to 2.41% and also UST 2yr yield rose to be now above 2% for the first time since 2008.
After bottoming out at 1.1915, EURUSD could creep up again to surpass its peak at 1.2092 which has been formed on Sep. 8.Surpassing this key resistance helped the pair to gain higher momentum by entering new pricing area trigging stop selling orders to be now trading at its highest reached level since Dec. 31, 2014 trading close to 1.2140 right now.The pair could keep its existence above its daily Parabolic SAR (step 0.02, maximum 0.2) by forming a higher low at 1.1915 and now it is living in its sixteenth consecutive day above this indicator which is reading today 1.1922
EURUSD is now in a higher place above its daily SMA50 and its daily SMA100 which are in intersection currently. While the pair was still underpinned over longer range by continued being above its daily SMA200 since forming a bottom at 1.0838 on last May. 11. As the pair could form series of higher lows starting with its formed bottom on the third day of last year at 1.0340. EURUSD daily RSI-14 is referring now to existence in a higher place inside the neutral region reading 68.388 close to the overbought territory above 70. EURUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is having now its main line in its neutral area at 65.373 leading to the upside its signal line which is in this same area at 37.128.Important levels: Daily SMA50 @ 1.1831, Daily SMA100 @ 1.1832 and Daily SMA200 @ 1.1547
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