The Euro (EUR) turned lower following a rebound in the US Dollar (USD) and mixed results from the recent German elections. EUR was last seen trading at 1.0472 levels, according to OCBC’s FX analysts Frances Cheung and Christopher Wong. The currency pair experienced sideways trade likely intra-day.
CDU/CSU, the leading German political party, secured the most seats but needs time to form a coalition government. The second-place Alternative for Germany (AfD) and left-wing party Die Linke won enough seats to potentially block crucial reforms, including those related to debt brakes. This could complicate policy-making concerning budget and fiscal spending.
Euro weakens amid dollar rebound
“There are looming risks of US tariffs on Europe and uncertainty over Ukraine peace, which may result in a heavier fiscal burden for the EU,” noted Cheung and Wong. Markets might remain cautious ahead of the next Governing Council meeting, preferring to lighten positions.
Technical indicators suggest that the EUR’s recovery momentum is fading, though some bullish signs remain on the daily chart. The Relative Strength Index (RSI) has flattened, indicating potential sideways movement intra-day. Key support levels are at 1.0420 (21 DMA, 23.6% Fib retracement), and 1.0390 (50 DMA), while resistance lies at 1.0540/70 levels (38.2% Fib retracement from the September high to January low).
In other economic news, the European Central Bank’s (ECB) recent report indicated that negotiated wage rates rose at a softer pace in Q4 compared to Q3, challenging the Euro’s resilience against its rivals. All eyes will now turn to upcoming market data and geopolitical developments which could impact the EUR/USD pair.
