EUR/USD – Euro Dips After German Election

The euro has started the week with losses, as EUR/USD has dropped below the 1.19 level. Currently, EUR/USD is trading at 1.1885, down 0.52% on the day. Germany went to the polls on Sunday, and Angela Merkel won a fourth term as president. On the release front, German Ifo Business Climate slowed to 115.2, short of the estimate of 116.0 points. Later in the day, ECB President Mario Draghi testifies before the European Parliament Economic and Monetary Affairs Committee. There are no US economic releases, but we’ll hear from three FOMC members – William Dudley, Charles Evans and Neel Kashkari. On Tuesday, the US releases CB Consumer Confidence and New Home Sales. Federal Chair Janet Yellen will speak at an event in Cleveland.

Angela Merkel easily won the German election on Sunday, but will have to cobble together a coalition in order to form a government. Merkel’s Christian Democratic Union (CDU) won 33% of the vote, the Social Democrats (SFD) won 20%, while the Alternative for Germany (AFD) took 13% of the vote. The AFD ran on a far-right, anti-immigrant platform, and the party’s surge in support has sent shock waves in Germany and across Europe. Merkel is taking her trademark “carrot” approach to the AFD and its voters, saying she hears their message to the mainstream establishment and will work to make sure that their concerns are heard. Merkel will now begin the arduous task of starting negotiations with the other parties in order to form a government. The euro lost ground after the election results, and has weakened further on Monday, after a disappointing reading from the German Ifo Business Climate for September. The indicator dropped to a 3-month low, but the reading of 115.2 still indicates strong economic growth in the eurozone’s largest economy.

The eurozone is enjoying solid growth, with much of the credit going to Germany, the largest and strongest economy in the bloc. The German economy continues to perform well, with low unemployment, strong consumer demand, and a robust export sector. Institutional investors and analysts like what they see, as last week’s German ZEW Economic Sentiment Sentiment rebounded in September and climbed to 17.3 points, following a disappointing reading in August of 10.0 points. The ZEW report was very positive, noting that German growth in the second quarter remained strong, and both the public and private sectors were marked by increased investment. The report added that the stronger euro had not had a negative impact on the German economy, and the upcoming German election had not caused any uncertainty in the markets.

EUR/USD Fundamentals

Monday (September 25)

• 4:00 German Ifo Business Climate. Estimate 116.0. Actual 115.2
• 8:30 US FOMC Member William Dudley Speaks
• 9:00 ECB President Mario Draghi Speaks
• 12:40 US FOMC Member Charles Evans Speaks
• 18:30 US FOMC Member Neel Kashkari Speaks

Tuesday (September 26)

• 10:00 US CB Consumer Confidence. Estimate 119.6
• 10:00 US New Home Sales. Estimate 591K
• 12:45 Fed Chair Janet Yellen Speaks

*All release times are GMT

*Key events are in bold

EUR/USD for Monday, September 25, 2017

EUR/USD Monday, September 25 at 6:35 EDT

Open: 1.1948 High: 1.1948 Low: 1.1880 Close: 1.1885

EUR/USD Technical

EUR/USD edged higher in the Asian session but has given up these gains in the European session

• 1.1876 is a weak support line
• 1.1996 is the next resistance line

Further levels in both directions:

• Below: 1.1876, 1.1712 and 1.1611
• Above: 1.1996, 1.2018, 1.2108 and 1.2221
• Current range: 1.1876 to 1.1996

OANDA’s Open Positions Ratio

In the Monday session, EUR/USD ratio is showing short positions with a majority (66%). This is indicative of EUR/USD continuing to move lower.

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