Euro Owes Its Strength to the News
At the end of November, the Euro is feeling very well. A remote possibility of creating a governing coalition in Germany and a strong report published by the European Central Bank supported the main currency pair while the United States of America was celebrating the Thanksgiving Day. The EUR/USD has potential to reach 1.20 and grow higher, unless the news and the German politics throw investors “a curve ball”.
Once again, investors have turned to Germany’s issue relating to a governing coalition. It’s been two months since the parliamentary elections and the Christian Democratic Union of Germany, the party led by Angela Merkel, hasn’t been able to strike a deal with any other political line, which didn’t get enough seats in Bundestag. Some said that the governing party’s political agenda was disappointing; other didn’t want to govern in a wrong way. As a result, right now Merkel’s CDU is “face to face” with the Social Democratic Party of Germany.
In the past, the SDP said that it had its own political views. Right now, these views are used as conditions that may help to form a coalition with the CDU, but only in case they are met. The conditions include changes of the country’s insurance system and other social issues. Merkel is confused: on one hand, the cabinet of ministers really needs this coalition, otherwise the parliament will have to be reelected. However, on the other hand, Merkel has already rejected other parties’ conditions, so why switch sides this time?
The report published by the European Central Bank showed that the regulator was no longer focused on the inflation as a major factor for making decision relating to its monetary policy. Investors immediately took these words as another speculations about closing the QE program earlier than it had been expected before. Such conclusions have little in common with the strategy the ECB spoke so many times about, but it’s okay for the EUR/USD pair to hit this kind of turbulence.
Hedge funds and the interbank market seem to intend buying the main currency pair. However, a very busy week is ahead, so the instrument will surely “swing” both upwards and downwards.
As we can see at the EUR/USD pair chart, the price has started another uptrend. The current price movement is expected to test the upside border of the current rising channel close to 1.2000 – 1.2020. After testing this area, the trend may transform into a correction towards the support line at 1.1875, which may result in a rebound and a new test of the area between 1.20000 and 1.2020. if the instrument breaks this area, it may continue growing to reach 1.2270.
Author: Dmitriy Gurkovskiy, Chief Analyst at RoboForex
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.