Report: FDP ready to support German minority government – EUR/USD rebounds

The worries about the failed German coalition talks sent EUR/USD some 50 pips lower. But this did not last. The pair is already back to 1.18, even exceeding the opening levels. This is more than a full recovery.

When a currency doesn’t fall on bad news, its strength is exposed. This implies magnified gains when good news comes out.

Update:  a report from the German tabloid Bild suggests that the business-friendly FDP party which walked away from coalition talks, decided to take a different path. They will support a minority government from the outside. Merkel would lead a government with the sister CSU party and the Greens.

The next level of resistance is still far: 1.1850 seems like a stretch after having visited a low of 1.1722 earlier in the day. Nevertheless, this level can be tackled later on. Support awaits at 1.1710 and 1.1670.

The next big event of the day is a testimony by ECB President Mario Draghi at 14:00 GMT. In his latest public appearance on Friday, Draghi expressed satisfaction with the robust economic growth that the currency area is experiencing. While he cautioned about low inflation, the tone was more upbeat than in previous speeches.

If he repeats this today, the euro may enjoy further gains beyond the high of 1.1808 swing high that was recorded recently.

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


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