EUR/USD – Euro Under Pressure as German Coalition Talks Collapse

It’s been a busy start to the week for EUR/USD. The pair lost ground in the Asian session, only to recover in European trade. Currently, EUR/USD is trading at 1.1789, down 0.04% on the day. In economic news, there are no major indicators in the eurozone or the US. German PPI remained unchanged at 0.3%, edging above the estimate of 0.2%. The markets will be keeping an eye on ECB President Mario Draghi, who will testify before the European Parliament Economic and Monetary Affairs Committee. Draghi will be discussing ECB monetary policy, and the markets will be looking for clues regarding future policy moves.

German coalition talks are in crisis, as the Free Democratic Party (FDP) pulled out of talks on Sunday.  Christian Lindner, head of the FDP, did not mince words, saying that there was no “basis of trust” to enter a government with Angela Merkel’s CDU-CSU alliance and the Greens. The parties have been holding negotiations for a month, but have failed to bridge the gaps on issues such as immigration. So what’s next? Merkel has said in the past that she will not run a minority government, but if she holds fast to that stance, Germany would likely face another election. Some pundits are predicting that this could be the end of the Merkel era, which could usher in a period of political uncertainty in the largest economy in the eurozone.

US indicators ended the week on a high note, as housing data easily beat expectations. Building Permits for single-family homes jumped to 1.30 million, above the estimate of 1.25 million. The annualized pace of 839,000 building permits in October was the fastest since September 2007. Housing Start also sparkled, accelerating to 1.29 million, compared to an estimate of 1.19 million. The catalyst for the strong numbers were hurricanes Harvey and Irma, which caused massive damage in the southern part of the US. With rebuilding efforts well underway, construction numbers should remain strong in the fourth quarter.

EUR Recovers After German Coalition Shock

EUR/USD Fundamentals

Monday (November 20)

• 2:00 German PPI. Estimate 0.2%. Actual 0.3%
• 6:00 German Buba Monthly Report
• 9:00 ECB President Mario Draghi Speaks
• 10:00 US CB Leading Index. Estimate 0.6%
• 11:00 ECB President Mario Draghi Speaks

Tuesday (November 21)

• 10:00 US Existing Home Sales. Estimate 5.42M
• 18:00 US Federal Reserve Chair Janet Yellen Speaks

*All release times are GMT

*Key events are in bold

EUR/USD for Monday, November 20, 2017

EUR/USD for November 20 at 6:55 EDT

Open: 1.1794 High: 1.1806 Low: 1.1722 Close: 1.1788

EUR/USD Technical

EUR/USD posted considerable losses in the Asian session but has recovered in European trade

• 1.1777 is providing weak support. It could see further action on Monday
• 1.1876 is the next resistance line

Further levels in both directions:

• Below: 1.1777, 1.1657, 1.1574 and 1.1489
• Above: 1.1876, 1.1936 and 1.2033
• Current range: 1.1777 to 1.1876

OANDA’s Open Positions Ratio

EUR/USD is unchanged in the Monday session. Currently, short positions have a majority (63%), indicative of EUR/USD breaking out and moving downwards.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.