- EUR/USD opens to the downside on political tensions, 1.15 handle eyed once again.
- EUR/USD bears losing grip as Seehofer’s resignation is not yet a done deal.
EUR/USD has opened the week with bears cheering the weekend’s political news whereby the interior minister and Leader of the Christian Social Union, Merkel coalition partner in government, Horst Seehofer, rejected a migration deal that Angela Merkel negotiated at last week’s Brussels summit. EUR/USD has opened the week at 1.1671 having closed on Friday at 1.1682, climbing from the depths of the 1.15 handle. So far today, EUR/USD has printed a low of 1.1660.
Seehofer’s resignation is not yet a done deal
A political crisis for Germany raises questions about Merkel’s position, and indeed Germany’s Economy Minister Altmaier suggests that the coalition is in a ‘serious’ condition while German regional elections will not be until October. Meanwhile, the euro’s selloff is unable to really pick up momentum because Seehofer’s resignation is not yet a done deal. Also, EUR/USD has not been very convincing on the downside attempts of the 1.15 handle and failed to break below on a closing basis, which has switched the attention back to the upside targets on the 1.18 handle.
Event risk
For the day ahead, the US data calendar holds May construction spending data will include revisions where forecasts of Q2 GDP could be tweaked. We also have the June national survey of manufacturing sentiment from the Institute for Supply Management – this is expected to ease to a strong 58.
EUR/USD levels
EUR/USD’s broader range remains between 1.1500 and 1.1850. 1.1508-10 May-Jun lows have held protecting the1.1448/1186/0863 downside target areas as being the 2016-18 rising Fibo levels. The 200-week moving average is also located down at 1.1435 while 1.1186/1.0814 comes as the 61.8% and 78.6% retracements). On the upside, a break of 1.1855 opens 1.20/1.21.
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