EUR/USD powers through 1.21 handle today on new that German Chancellor Angela Merkel has achieved some breakthrough in forming the new coalition government. It’s reported that Merkel has struck a deal with the Social Democrat to formally open talks for reforming the grand coalition. The marathon talks were closed with a 28-page blue print between the CDU/CSU and SPD. Close cooperation with France to strengthen the Eurozone is one of the key point of the blue print.
Merkel said after the talks that "we have felt since the elections that the world will not wait for us, and in particular regarding Europe we are convinced we need a new call for Europe". She also noted that "there will be difficult tasks to come" and, "the coalition negotiations probably won’t be easier than the exploratory talks."
SPD leader Martin Schulz said in the joint press conference that there were "turbulent moments" during the talks but negotiators "never faced the risk of failure".He pledged that ‘we want to ensure economic and political power for Germany is put towards creating a stronger Europe."
Released from US, headline CPI rose 0.1% mom, 2.1% yoy in December, slowed from 2.2% yoy but met expectations. Core CPI, on the other hand, beat expectation of rose 0.3% mom, 1.8% yoy. Headline retail sales rose 0.4% mom in December, while ex-auto sales also rose 0.4%. But the data provides little support to the greenback.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.1953; (P) 1.2006 (R1) 1.2084; More….
EUR/USD’s firm break of 1.2091 resistance today indicates resumption of medium term rise from 1.0339. Intraday bias is back on the upside. Current rise should target 1.2494/2516 key resistance zone next. On the downside, break of 1.1915 support is needed to confirm short term topping. Otherwise, outlook will remain bullish in case of retreat.
In the bigger picture, rise from 1.0339 medium term bottom is still seen as a corrective move for the moment. Therefore, in case of another rally, we’d be expect 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516 to limit upside and bring reversal. That is also close to 61.8% projection of 1.0569 to 1.2091 from 1.1553 at 1.2494.
