EUR/USD: Merkel sees disappointing victory, Draghi’s testimony holds the key

The EUR/USD pair staged a solid comeback on 1.19 handle, reversing more-than half the German’s election outcome induced sell-off to 1.1898 levels, as attention turns towards the ECB Chief Draghi’s testimony and Fedspeaks due later on Monday.

EUR/USD: Focus shifts to German Ifo, Draghi

The main currency pair witnessed a bearish opening gap and dipped briefly below 1.19 handle, after markets reacted negatively to the German election outcome, reflecting a disappointing victory for Merkel’s Conservatives (CDU) Party, which is now set to form a coalition government.

Merkel failed to win with a majority, recording its weakest result since 1949, while the AfD Party’s rise posed a big challenge to Merkel’s CDU. More so, with a coalition government now, markets believe Merkel could be forced to rein in her plans to re-shape Europe together with France's Emmanuel Macron.

However, over the last hours, the spot managed to recover ground somewhat, but is now seen struggling to close in the bearish opening gap, as the USD bulls continue to keep a lid on the recovery, in the wake of the recent hawkish surprise from the Fed.

Meanwhile, the major also remains wary ahead of the ECB President Draghi’s testimony due later today on the economy and monetary developments before the European Parliament Economic and Monetary Affairs Committee, in Brussels. Also, of note for the Euro remains the German Ifo business surveys due on the cards in the European session ahead.

EUR/USD Technical Set-up  

Valeria Bednarik, Chief Analyst at FXStreet, noted: “The fact that the pair remains far above its 100 and 200 SMAs, keeps the long term risk towards the upside. Shorter term, and according to the 4 hours chart, the outlook is pretty much the same, as the price converges with its 20 and 100 SMAs, both lacking directional strength, and technical indicators heading nowhere right below their mid-lines. Support levels: 1.1900 1.1860 1.1820 Resistance levels: 1.1965 1.2000 1.2030.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD hits fresh one-month low amid souring market mood

EUR/USD has been extending its falls and dips below 1.21 as US retail sales badly disappointed and the worsening mood is supporting the safe-haven dollar. Markets digest Biden's stimulus plan. US Consumer Sentiment declined to 59.2 points. 


GBP/USD retreats toward 1.36 amid fresh dollar strength

GBP/US has pared its gains and falls toward 1.36 as the dollar gains ground. The UK economy shrank by 2.6% in November, better than estimated. The UK is ramping up its vaccination campaign and PM Johnson is pressured to ease the lockdown. 


Gold extends sideways grind near $1,850

The XAU/USD pair registered small daily gains on Thursday but struggled to extend its recovery amid a lack of significant fundamental drivers on Friday. As of writing, the pair was up 0.15% on a daily basis at $1,849.

Gold news

Forex Today: Markets “sell the fact” on Biden's stimulus, dollar rises, retail sales eyed

Markets are on the back foot after Biden hinted about tax hikes while introducing stimulus. The safe-haven dollar is edging higher despite Powell's pledge to keep monetary policy accommodative. 

Read more

DXY breaks above key downtrend, eyes move above 91.00

USD has been strongly supported on what has shaped up to be a very much risk off final trading day of the week. Most G10/USD pairs have seen significant weakness, aside from CHF/USD and JPY/USD, given that the two currencies are also considered “safe havens”.

US Dollar Index News