Submitted by Shant Movsesian and Rajan Dhall MSTA of fxdailyterminal.com
The key move in the FX majors last week as the upturn in EUR/USD, where the first key area of support on the downside at 1.1500-1.1625 held well to generate the move up into the mid-upper 1.1800’s. In the previous week we also asked whether the USD correction was over, and some may assume that based on the key weighting in the USD index – it is. Clearly the longer term outlook on Europe has been the driver of what is now seen as a default position in FX. The German economy has been leading the way with solid growth, as Q3 saw a rise of 0.8%, which should be confirmed on Thursday. Alongside this, we get the PMI data for Nov which will likely confirm more of the same across the whole Euro region, with the German IFO on Friday unlikely to buck the positive trend as the institute maintain their positive growth projections.
Over the weekend however, the coalition talks in Germany have made the headlines with the FDP leader walking out of the negotiations with Chancellor Merkel’s CDU and the Greens, with wide ‘differences’ of opinion on immigration and climate amongst other issues lower down the pecking order. This leaves Merkel with 3 options; a new election, governing without a majority or continuing talks for an eventual agreement – all 3 to keep the EUR from maintaining the upside bias with clear conviction. That said, we are in a market which is getting used to brushing aside key risk factors, and the early Asian response is usually tempered to some degree by the more liquid London markets – as we saw with GBP the previous weekend!
This post was published at Zero Hedge on Nov 20, 2017.
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