EUR/USD rises towards the critical double-top – 3 reasons for the rise

EUR/USD is currently trading just under 1.850, very close to the double-top of 1.1860. The first rejection from this level was seen in mid-October. It was then followed in mid-November. Will the third attempt be the charm? This is undoubtedly a tough nut to crack.

Why is EUR/USD rising? Here are three reasons for the rally we are seeing now.

  • Hopes for a German grand coalition: There are reports that SPD leader Martin Schulz will quit. He opposed entering a grand coalition with Angela Merkel’s CDU. His socialist party lost a lot of votes due to sitting in Merkel’s government and he prefers going into opposition. Yet after the failure of talks to cobble a “Jamaica coalition”, Germany’s president Steinmeier, himself an ex-SPD leader, urged everybody to find a solution. Pressures are mounting on Schulz to change his mind or go. A grand CDU/SPD coalition is exactly what markets want.
  • Excellent euro-zone PMIs: The French manufacturing sector’s PMI hit 57.5 points, a big jump and the services sector tops 60.2, a huge leap and reflecting robust growth. In Germany, the manufacturing PMI is reaching for the sky with 62.5 points. The hard data such as GDP provide reasons to be cheerful as well. Other PMIs also look good. The implication is another solid quarter of growth in 2017, concluding an excellent year for the euro-zone.
  • Dovish Fed minutes: The US dollar received two blows yesterday: First Yellen and then the FOMC minutes cast serious doubts about inflation. They are finally seeming to recognize that lower prices are here to stay and not transitory or due to temporary factors. This sent the dollar down across the board and the euro is all set to take advantage of it.
  • Resistance above 1.1860 is at 1.1910, followed by 1.20 and 1.2090. Support awaits at 1.1820, 1.1860 and 1.1710.

    More: EUR/USD to 1.19 in 2017 and beyond in 2018? Two opinions

    Here is how the moves and the double-top look on the chart:


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