The Euro (EUR) fell below 1.05 overnight, but the decline was short-lived. Last seen at 1.0568 levels, note OCBC FX analysts Frances Cheung and Christopher Wong.

EUR to continue to suffer due to the outcome of the US election

“Daily momentum is bearish, although the RSI is showing tentative signs of a reversal from near oversold conditions. Short-term consolidation is not out of the question, but the tendency to sell rallies. Resistance at 1.06, 1.0740 (76.4% 2024 fibo retracement from low to high), 1.0780 (21 DMA). Support at 1.05, 1.0450/1.05 levels.”

“Overall, the EUR should continue to bear the brunt of the US election outcome. Trump’s presidency will result in changes in US foreign trade policies. The potential 20% tariff (if implemented) could hurt Europe, where growth is already slowing and the US is the EU’s main export destination.”

“In German politics, the minority government faces economic and diplomatic challenges. Prime Minister Scholz is seeking an earlier confidence vote on December 16, instead of January 15, but is expected to lose. Early elections are likely planned for February 23. Elsewhere, EU-UST yield spreads continued to widen, validating the EUR’s “fair value” against yield spreads.”