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EURUSD: risks from Germany persist
Forex
07/02/2018

EURUSD: risks from Germany persist

The euro received a boost on Friday after the EU leaders reached an agreement over the migration issue. The EURUSD rallied but failed to challenge the 1.17 local resistance.

The euro received a boost on Friday after the EU leaders reached an agreement over the migration issue. The EURUSD rallied but failed to challenge the 1.17 local resistance. The bullish impetus turned out very short term and unsustainable as the situation in Germany remains unresolved, so the pair is losing ground on Monday, remaining above 1.16 so far.

Merkel’s coalition is at risk of collapse as the Chancellor’s conservative allies rejected the recent EU migration deal. Against the backdrop of further political crisis escalation in the largest euro zone economy, the euro’s attractiveness is decreasing. Meanwhile, the persistent bullish trend in USD only adds to the pressure. And this week’s FOMC meeting minutes due on Thursday could further undermine the single currency’s positions should the Fed sound hawkish.

The technicals point at a neutral stance in the EURUSD for now. The price needs a sustainable break above the 20-DMA at 1.1670 and then a recovery above the 1.17 threshold in order to shrug off some pressure from USD bulls. On the other hand, as long as the pair holds above the 1.15 key support, there is a chance for a rebound above the mentioned levels after the German risks ebb.


By Helen Rush
Senior Analyst at Capital Markets

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