The Euro opened with gap lower on Monday as political uncertainty rises after German far-right AfD party won a surprise gain in votes and enters parliament for the first time. This put Angela Merkel, who won the election in difficult position as she now faces though work to form the coalition after the Social democrats said they are moving into opposition after gaining around 20% votes in Sunday’s election. The EURUSD pair dipped to 1.1890 low (30SMA) after Monday’s opening and recovered most of overnight’s losses on recovery rally in Asian trading, but gap stayed unfilled after daily Tenkan-sen/10/20SMA bear-cross formation capped recovery action at 1.1935. Fresh weakness in early hours of the European session keeps near-term risk shifted lower. The notion is supported by Shooting star pattern which formed on daily chart after Friday’s strong upside rejection and subsequent weakness on Monday, as well as bearish near-term techs. Violation of today’s low would expose key near-term supports at 1.1861/50 (last week’s lows/the neckline of H&S pattern on daily chart) and 1.1837/22 (lows of 14 Sep/31 Aug), break of which would trigger deeper fall. Selling upticks is seen as favored near-term scenario while the price stays under 4-hr cloud (1.1933/1.1965). Alternative scenario requires sustained break above 1.1965 (top of 4-hr cloud) to sideline near-term bears.
Res: 1.1935, 1.1950, 1.1967, 1.1994
Sup: 1.1890, 1.1861, 1.1850, 1.1822
