- 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
AUD/USD could extend the recovery to 0.6500 and above
The enhanced risk appetite and the weakening of the Greenback enabled AUD/USD to build on the promising start to the week and trade closer to the key barrier at 0.6500 the figure ahead of key inflation figures in Australia.
EUR/USD now refocuses on the 200-day SMA
EUR/USD extended its positive momentum and rose above the 1.0700 yardstick, driven by the intense PMI-led retracement in the US Dollar as well as a prevailing risk-friendly environment in the FX universe.
Gold struggles around $2,325 despite broad US Dollar’s weakness
Gold reversed its direction and rose to the $2,320 area, erasing a large portion of its daily losses in the process. The benchmark 10-year US Treasury bond yield stays in the red below 4.6% following the weak US PMI data and supports XAU/USD.
Bitcoin price makes run for previous cycle highs as Morgan Stanley pushes BTC ETF exposure
Bitcoin (BTC) price strength continues to grow, three days after the fourth halving. Optimism continues to abound in the market as Bitcoiners envision a reclamation of previous cycle highs.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Federal Reserve might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.