Welcome to the last week of September. The was unmoved at this week’s opening as the German election failed to produce a clear winner. Following the tight election, the Social Democrats edged ahead of Merkel’s conservative bloc. Germany is set for a three-way coalition, led by SPD’s Olaf Scholz but it could take months of negotiations and uncertainty to form a coalition. The euro was steady until this morning, holding above 1.17.
Following last week’s hawkish messages from the and the Bank of England, the and the could gain traction but it will also depend on the market’s risk appetite for other peers. We will keep an eye on the technical picture in order to validate potential price breakouts in the coming days.
Compared to the last week, we do not have the heavy docket of event risks this week but traders should keep an eye on the European Central Bank’s forum panel on Wednesday that brings together heads of the Fed, ECB, BoE and BoJ. The top listing for data will be Friday’s PCE deflator, the Federal Reserve’s favorite inflation indicator. Furthermore, Fed Chair Jerome Powell and Treasury Secretary Yellen will testify at a Senate Banking Committee on Tuesday.
EUR/USD: We expect the pair to trade between 1.1770 and 1.1660. A clear break above 1.1770 could open door for a test of 1.1830 whereas below 1.1640, bears will gain control.
: As long as the cable remains above 1.36, chances are in favor of the bulls with a higher target at 1.3880. Falling below 1.36 could see a dip towards 1.35.
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