Political impasse stifles EUR/USD

If currency pairs are a reflection of two different economies, recent moves in EUR/USD have ironically been rather subdued.

Midnight is the deadline for the US government to avert a shutdown as the debt ceiling looms large; a short-term budget needs to be decided by Congress if we are to avoid this. Meanwhile, over in Italy, Silvio Berlusconi is once again centre stage, calling for fresh elections.

In September eurozone CPI rose at its slowest pace since February 2012, rising by 1.1% down from last month’s 1.3%. This may spur the European Central Bank into a looser monetary stance, and would support Mario Draghi’s comments that long-term refinancing operations loans might be made available sooner rather than later.

The last fortnight has seen the euro fail to make any progress through 1.3570. The current range is a mere 100 points, with support coming from the 1.3460 level. The overhead resistance has been the key barrier to any test of the 1.37 highs seen earlier this year.

With the dollar already near eight-month lows against the euro, a break of this range could result in a measured move. A breach of 1.3450 (last week’s support) may well see the single currency fall back towards levels of 1.3330.

Spot FX EUR/USD chart

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.