Today we shall take a look at the EUR/USD currency pair. Ever since the first week of September the exchange rate of this pair has been locked in a bearish trend. However, over the past week it has not been as steep as before and for now the rate remains close to 1.17.
At the moment the euro is not in a very good position to strengthen versus the US dollar. The most interesting event for the European single currency were last weekend’s parliamentary elections in Germany, arguably the most important EU member state. However, there were no surprises this time around. The more spending-friendly SPD came in first, while Angela Merkel’s CDU/CSU (which is no longer under her leadership) retreated to second place, followed by the Greens and the FDP. The new government of Germany is likely going to be a coalition of three out of those four parties, either the SPD, Greens, and FDP, or the CDU/CSU, Greens, and FDP. The former alliance will see Germany increase its spending to promote economic growth, while the latter will preserve the status quo as we know it. But in either case, it is likely that negotiations will take a few months, so the election results will not be the primary force affecting the euro for now. Instead, the EUR will be influenced by whether or not there is risk appetite among investors. For the moment, they seem to prefer slightly safer assets.
Due to the greater demand for safe haven assets, the US dollar has been able to strengthen against the euro in the past weeks. Naturally, the ongoing coronavirus pandemic has been a main contributor to risk aversion. In addition, the developments in China, where Evergrande Group is in a technical default, are also keeping investors wary, leading to more demand for reliable assets like the US dollar. There may be increased volatility in dollar pairs later today with the publication of the durable goods orders report for August.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1722, with the price currently trading below it. The daily support levels lie at 1.1710 and 1.1704, both overcome. The daily resistances are located at 1.1728 and 1.1734. The indicators of technical analysis strongly agree in recommending a sell position today.
