EUR/USD: headed for a break of 1.1720 and eyes for 1.1310?
EUR/USD is chipping away at the downside, driven by a turn in sentiment for the EZ on the back of political and dovish ECD commentary, now extending the losses from above the 1.18 handle. EUR/USD is trading at 1.1738, down -0.48% on the day, having posted a daily high at 1.1810 and low at 1.1722.
Analysts at Brown Brothers Harriman have offered a full load down of the political climate in Germany:
- German politics: what's next? - BBH
"Talks to forge a new coalition government in Germany passed the self-imposed deadline at the end last week, and the markets paid little attention. The euro finished last week a little below $1.18, up to a little over 1% on the week. Talks continued over the weekend and then, late yesterday, the pro-business Free Democrats, with a dramatic flair, walked out of the negotiations."
This development sent the euro into a tailspin and markets are dealing with those pressures as we progress through Monday in NY. elsewhere, Draghi has hit the wires and the outcome has been dovish, further adding to the downside in the euro.
- Draghi Speech: The ESRB continues to monitor risks to the EU financial system
- Draghi Speech: No risk for central banks from digital currencies currently
- Draghi Speech: QE program has enough flexibility to be adapted
- Draghi Speech: We expect job gains to push inflation to target
"EUR/USD has eased back to the previous downtrend," noted analysts at Commerzbank, adding, "The correction higher remains in force and near term dips are indicated to terminate circa 1.1740/20. We should see the market retest the 200-day ma at 1.1310"