- EUR/USD fades bounce off five-week low flashed last week.
- German election polls challenge Angela Merkel’s reign, dim bloc’s economic reform hopes.
- Risk-off mood underpins US dollar’s safe-haven demand, US Treasury yields cheer Fed tapering concerns.
- US Durable Goods Orders, risk catalysts eyed for fresh impulse, updates from Germany, Evergrande are the key.
EUR/USD bears remain at the loggerheads with the bulls after a three-week downtrend around 1.1720 amid early Monday morning in Asia. In doing so, the major currency pair remains pressured near August month’s low as fears over a political deadlock in Germany, the bloc’s powerhouse, challenge the economic recovery hopes.
As per the latest poll, Angela Merkel’s center-right Christian Democratic Union (CDU) lags a bit behind center-left Social Democrats (SPD). ''The center-left Social Democrats (SPD) were on track for 25.5% of the vote, ahead of 24.5% for Merkel's CDU/CSU conservative bloc, projections for broadcaster ARD showed, but both groups believed they could lead the next government,'' Reuters reported.
Although a coalition government is a sure outcome, SPD’s more power over Merkel’s resignation after 16 years of performance question the region’s future due to Germany’s powerhouse status. Reuters expressed the conditions while saying, “Nothing happens in Europe without German leadership, according to an old adage. That makes Sunday’s tight election in the region’s biggest economy particularly disconcerting.”
Read: German Elections Preview: Three EUR/USD scenarios for the post-Merkel dawn
Elsewhere, US Federal Reserve (Fed) policymakers reiterate tapering concerns and back the US 10-year Treasury yields to refresh a three-month top. Also favoring the US dollar are the concerns over China’s Evergrande and uncertainty over US budget allocations and the debt ceiling. Recently, US House Speaker Nancy Pelosi stepped back from her previous hints to put the stimulus bill on the House floor on Monday.
Amid these plays, equities manage to stay firmer on Friday while the S&P 500 Futures print mild gains by the press time.
In addition to the German Election updates, US Durable Goods Orders and the risk catalyst are also important to watch for near-term EUR/USD direction.
Read: US Durable Goods Orders August Preview: Retail Sales have led the way
Technical analysis
In addition to a downward sloping trend line from September 03, a convergence of 50-DMA and 20-DMA, respectively near 1.1760 and 1.1785, also challenges the EUR/USD buyers.
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
Gold climbs to new all-time high above $3,400
Gold extends its uptrend and trades at a new all-time high above $3,400 on Monday. Concerns over US-China trade war escalation and the Fed’s independence smash the US Dollar to three-year troughs, fuelling XAU/USD's rally.
EUR/USD clings to strong gains above 1.1500 on persistent USD weakness
EUR/USD gains more than 1% on the day and trades at its highest level since November 2021 above 1.1500. The relentless US Dollar selling helps the pair push higher as fears over a US economic recession and the Federal Reserve’s autonomy grow.
GBP/USD tests 1.3400 as USD selloff continues
GBP/USD continues its winning streak, testing 1.3400 on Monday. The extended US Dollar weakness, amid US-Sino trade war-led recession fears and heightened threat to the Fed's independence, underpin the pair following the long weekend.
How to make sense of crypto recovery – Is it a buy or fakeout
Bitcoin (BTC), Ethereum (ETH) and XRP, the top three cryptocurrencies by market capitalization, extend their last week’s recovery on Monday, even as trader sentiment is hurt by the US President Donald Trump’s tariff policy and announcements.
Five fundamentals for the week: Traders confront the trade war, important surveys, key Fed speech Premium
Will the US strike a trade deal with Japan? That would be positive progress. However, recent developments are not that positive, and there's only one certainty: headlines will dominate markets. Fresh US economic data is also of interest.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.