Potential U.S. Government Shutdown And Germany’s Coalition Talks In Focus

Dear Traders,

The U.S. dollar continues to disappoint dollar bulls while being unable to find its footing against other major currencies. Market participants remain focused on the political risk potential around the U.S. government shutdown, which could take effect at the end of today’s trading day if no budget deal is reached. With developments in Washington being the primary focus, the dollar could remain under pressure.

The University of Michigan’s Consumer Sentiment Index is due at 15:00 UTC, but this report might only have a limited impact on the greenback.

The pound sterling gained further ground against the dollar and seems to be well on track to recover its post-Brexit referendum losses. The GBP/USD followed the recent uptrend and climbed back above 1.39 after finding fresh support at 1.38. If the pound holds above 1.3850 we could see a bullish run for 1.40 and possibly 1.4040.

The U.K. Retail Sales report is due at 9:30 UTC today and could have a minor impact on the pound’s price action.

The Euro held above 1.22 but traders should be aware of profit-taking ahead of the upcoming ECB meeting next week. There is increased speculation that ECB President Draghi will seek to talk the Euro lower following its rapid appreciation. Apart from the ECB’s monetary policy, there will be a vote by the Social Democrats in Germany to begin talks regarding a grand coalition this weekend. If the SPD votes against a coalition the euro could suffer a setback.

From a technical perspective we keep tabs on the 1.2350-level which could serve as a short-term resistance in the EUR/USD. Euro bears should however wait for prices below 1.2190 in order to expect accelerating bearish momentum.

We wish you good trades and a beautiful weekend.

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