Bearish view
- Sell the EUR/USD and set a take-profit at 1.1600.
- Add a stop-loss at 1.1800.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.1730 and a take profit at 1.1800.
- Add a stop-loss at 1.1650.
The EUR/USD pair is hovering near the lowest level since the end of August as investors reflect on the German election. It is trading at 1.1700, which is slightly below last week’s high of 1.1750 ahead of the latest American consumer confidence data.
German Election
Germany held a closely-watched election to replace Angela Merkel, who has been in power for about 16 years.
The election results showed that Olaf Scholz, the current finance minister will become the country’s new prime minister. His Social Democrats party won about 25.7% of the votes, meaning that he will need to form a coalition, a process that can take several months to complete.
Still, analysts believe that Scholz policies will likely not have any major differences with those advocated by Angela Merkel. Still, the uncertainty about forming a government could have some impacts on the country’s economy.
The EUR/USD also reacted mildly to a statement by Christine Lagarde on Monday. In it, she said that the bank was open to having inflation remain above the 2% target rate for a while. She reiterated the bank’s view that inflation will ultimately drop to 2% as the ongoing supply challenges ease.
Eurostat will publish the flash estimate of September’s inflation on Thursday. Analysts expect the data to show that the bloc’s consumer prices rose in September as energy prices rose.
Meanwhile, the pair remained under pressure after the latest durable goods order numbers. The data showed that the headline durable goods orders rose from 0.5% in July to 1.8% in August. The core durable orders rose by 0.2% after rising by 0.8% in the previous month.
Later today, the Conference Board will publish the latest consumer confidence data. Economists expect the data to show that consumer confidence rose from 113.8 in August to 114.5 in September. The EUR/USD will also react to a testimony by Jerome Powell.
EUR/USD Forecast
The four-hour chart shows that the EUR/USD has been under intense pressure in the past few weeks. It has fallen by more than 1.7% from its highest level this month. The downward trend is being supported by the 25-day and 50-day moving averages (MA). It is also below the Ichimoku cloud, which is a bearish signal.
Therefore, the pair will likely continue falling as the German coalition building starts and risk of a US government shutdown rise.
