EUR/USD: underpinned in higher range (1.1970/06) ahead of FOMC and German elections
After being the best performer on Monday, EUR/USD opened Asia 0.30% higher and went on to score a few pips into the 1.20 handle in thin trade (1.2006 high), the highest level since 10th September.
The euro's strength was more about flows in European and US trade, (sparked by Yen weakness, EUR/JPY to fresh 21-year highs, 134.17). However, the EZ news and data were both supportive of the euro before profit taking and the handover into this subdued New York session, (second tier US data and Trump's address to the U.N. not sparking any price action - market awaiting FOMC outcome).
Germany's September ZEW current situation arrived at 87.9 vs 86.2 exp. Eurozone July current account SA arrived as EUR 25.1bln vs 22.8bln previous and Eurozone July construction output mm was 0.2% matching the previous.
EUR/USD was sliding back to 1.1954 London lows and has settled into a consolidation phase in the US session around 1.1970, underpinned in a higher range ahead of Wednesday’s FOMC meeting.
German elections on Sunday
In respect of this weekend's elections in Germany, where Merkel goes for a 4th term after a twelve-year leadership the euro was even unfazed by the latest election poll from Forsa that sees Merkel & Co now down to 36% ( -1% on the week) and placing the SPD unchanged at 23%.
An unlikely scenario, but should Merkel be short of a parliamentary majority in the Bundestag she will need weeks, if not months, to form a new coalition government and the euro could come under pressure in such a scenario. However, while Merkel is fully expected to become the President again, investors remain vigilant to geopolitical events and are not committing themselves to any certainties at this stage.
FOMC forecasts
- US: Focus on Sep FOMC meeting - Westpac
- FOMC Preview: there's nothing the Fed can do to save the greenback
In respect of techncials, as we await the FOMC, Valeria Bednarik, chief analyst at FXStreet explained that EUR/USD is overall maintaining the bullish long-term stance, as in the daily chart, the price remains well above an ascendant trend line coming from early April, currently around 1.1820, whilst the price remains far above bullish 100 and 200 SMAs, and around the 20 SMA, which losses upward strength.
Valeria Bednarik's full technical analysis of EUR/USD:
"Technical indicators in the same chart hold within positive territory but lack directional strength. The pair has an immediate resistance in the 1.2030/60 region, with gains beyond the level exposing firstly the 1.2101 level, January 2015 high. Beyond it, the rally can extend short-term towards 1.2140/60, while a daily close above 1.2100 will open doors for an extension towards 1.2300 in the following days. 1.1910 is the immediate support, ahead of the critical 1.1820, where the pair has the mentioned trend line and a relevant weekly low from August. Further slides below this level will leave the pair poised for a deeper downward corrective movement, down to August 17th low at 1.1661."