EUR/USD forecast after the latest German election

The EUR/USD pair declined slightly on Monday as investors reflected on the results of Sunday’s German election. The pair fell to 1.1682, which was slightly below last week’s high of 1.1755.

German election outcome

Germany is the fourth-biggest economy in the world and the biggest in Europe. Therefore, the country’s performance tends to have an outsize role in the European Union. 

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The country went to a landmark election that will produce the successor to Angela Merkel, who has been in power for 16 years. Media reports suggest that Olaf Scholz, the current finance minister won the election. His party, the Social Democrats, won about 25.7% of the total votes cast. 

Armin Laschet, of the CDU, won about 24% of the total vote and claimed that he had gained the right to form a new government.

Therefore, the EUR/USD pair declined because investors believe that the process of forming a coalition will take months. Besides, the parties involved have significant differences that they will need to address first. As such, these negotiations could derail the country’s recovery.

Looking ahead, there are several key economic numbers that will affect the EUR/USD this week. First, Europe will publish its flash consumer price index (CPI) this week. These numbers are expected to show that the region’s inflation rose in September as energy prices rose.

Second, the US’ Conference Board will release the latest consumer confidence data on Tuesday. The data is expected to show that consumer confidence declined in September as the cost of living rose. Other key numbers will be the latest American GDP and PCE numbers.

The EUR/USD will also react to the ongoing US debt ceiling negotiations and the potential for a government shutdown.

EUR/USD forecast

The four-hour chart shows that the EURUSD pair declined sharply on Monday. The pair has formed an inverted cup and handle pattern that is shown in red. It seems like it about to complete the handle section of this pattern. At the same time, the bearish trend is being supported by the 25-day and 50-day moving averages.

Therefore, the path of the least resistance for the pair will be to the downside, with the next key level to watch being 1.1600.