Will German State Elections Push The Euro Higher?

The global news stations were busy over the weekend covering the biggest cyber-attack in the history, which affected more than 200,000 businesses across Asia, Europe, and the US, raised many questions and red flags about the exchanges securities.

Such incident might not be over yet according to many reports, and such thing would be an opportunity, as volatility is likely to be on the rise this week.

However, equities so far have ignored this news, most of Asia and Europe are up, while the US futures are slightly higher ahead of the opening bell.

Yet, the biggest news in the currency market is the Euro, which began the week higher across the board, adding more than 0.4% against the US Dollar so far. Trading above 1.0950, nearing its last week’s high around 1.10.

What’s Behind The Euro Rally?

There are two events that support the Euro for the time being: the first one is the French election outcomes, which ended with Macron to be the next president of France.

This is seen as a victory not only for France but for Europe and especially the European Union, as there were fears regarding a possible Frexit if the Far-Right Candidate Le Pen was elected.

What’s more important than the French election is the German election.

Angela Merkel’s party scores a big win in a key state election on Sunday. The victory came in Germany’s most populous state that was seen as a dress rehearsal for national parliamentary elections in September.

Such victory means that Angela Merkel will seek a fourth term, and if this happens, this will be considered as another victory for the united European Union.

French President @EmmanuelMacron is due today to meet with German Chancellor Angela #Merkel, marking a new era in Franco-German relations pic.twitter.com/c2WVUBA1j1

— DW | Politics (@dw_politics) May 15, 2017

What About EUR Gap

Since the end of the first round of the French election, the Euro succeeded in stabilizing above 1.0860’s support area for the past three weeks.

On Thursday, EURUSD lost its momentum and declined all the way back to 1.0838. However, it managed to recover on Friday and closed last week well above 1.0920 due to the US economic releases on Friday, which eased the chances for a possible rate hike by the Fed in June.

With the German news over the weekend, the Euro began the week even higher. Does this mean that the gap will not be filled? The simple answer is No. The gap must be filled, but the question remains here is when. The answer to this question is also unknown, but there is a key level to keep an eye on.

1.0860’s remains the key level to watch over the coming days and weeks. As long as the Euro stays above that support, the possibility of filling the gap would remain very weak.

Otherwise, a break through that support would be the first signal for another leg lower, to close that gap. Until then, try to avoid aggressive trading on EUR pairs.

EURUSD Technical Outlook

Looking at the daily chart, the technical indicators are still positive and still have more room for further gains after last week’s downside correction.

The first immediate resistance stands at 1.10, which should be watched carefully, as a break above that resistance would clear the way to test this year’s high around 1.1022 with a higher possibility of a break above that resistance as well.

If so, 1.1070 and 1.11 would be the Euro’s next station. Otherwise, a double top pattern might be in place, and another leg lower to retest 1.0860 would be more likely.

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