EUR/USD: Recovery falters, back to test 1.2200 on German politics?

The EUR/USD pair witnessed good two-way price movement so far this Tuesday, in the wake of broad-based US dollar rebound and German political headlines.

The spot broke its bullish consolidation phase to the downside in early Europe and dropped as low as 1.2216 after the EUR was hit by the reports that the German SPD rejected coalition talks with Merkel’s Conservatives Party.

However, the bulls fought back control somewhat, as the German coalition breakdown fears calmed down, having sent the pair pack towards 1.2270 region. But, over the last hour, a fresh buying-wave caught by the US dollar against its main competitors appears to have capped the recovery in the main currency pair, as the bears once again target the 1.22 handle amid a data-light EUR docket.

Meanwhile, the sentiment around the major remains underpinned on the back of the recent hawkish ECB-speak while in line with expectations German final CPI data also offer some support to the EUR bulls.

There is nothing of note for the pair in the day ahead, except for the second-liner US regional manufacturing index. Hence, attention turns towards the Eurozone final CPI and US industrial figures slated for release tomorrow.  

EUR/USD Technical Levels

Slobodan Drvenica, Information & Analysis Manager at Windsor Brokers Ltd: “Firmer bearish signals are required to spark correction and expose initial supports at 1.2206 (Fibo 23.6% of 1.1915/1.2296 upleg) and 1.2187 (yesterday's low). Next significant support lies at 1.2150 (Fibo 38.2%) and corrective action should ideally find footstep here to keep intact pivotal supports at 1.2100 zone (former tops/daily Tenkan-sen). The overall structure is firmly bullish and favors continuation of broader uptrend after consolidative/corrective phase. A sustained break above 1.2300 barrier is needed to signal bullish continuation.”