EUR/USD: German elections Sunday – OCBC

As of 17 Feb, Politico’s poll of polls shows CDU/CSU leading at 30%, AfD at 21%, SPD at 16% and Greens at 13%, while other smaller parties are in the region of 5% or so. EUR/USD drifted higher amid broad US Dollar (USD) pullback. Pair was last seen at 1.0469 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.  

Bullish momentum on daily chart intact

"This suggests that none of the parties can secure an absolute majority, meaning a coalition will need to be formed. The most likely coalition would have been the union (CDU/CSU) with SPD but Monday evening’s TV show in Berlin saw both leaders Merz (from CDU/CSU) and Scholz from SPD ruled out serving together in the same cabinet. Hence, government formation may take a while and is likely to involve a grand coalition between CDU/CSU and a few other smaller parties."

"On recent ECBspeaks, Makhlouf warned that the disinflation process is subjected to a very high degree of uncertainty surrounding the outlook while Schnabel said that they are getting closer to the point where the ECB may have to pause or halt rate cuts. She added that officials should discuss at their March meeting the possibility of removing language from their post-decision statement that monetary policy is still restraining the euro-zone economy."

"EUR drifted higher amid broad USD pullback. Bullish momentum on daily chart intact while RSI rose. Resistance at 1.0540/70 levels (100 DMA, 38.2% fibo retracement of Sep high to Jan low). Break out puts next resistance at 1.0620, 1.07 (50% fibo). Support at 1.0420 (21 DMA, 23.6% fibo), 1.0390 (50 DMA)."