German coalition talks fail, putting Merkel on the spot. German Chancellor Merkel is facing the risk of new elections after preliminary coalition talks with the liberal FDP and the Green Party failed over the weekend. Former coalition partner SPD has already ruled out a renewed coalition with Merkel’s CDU/CSU and neither the far left nor the far right are possible partners for Merkel, leaving her with little choice but new elections, if neither SPD nor FDP change the mind after forcing the Chancellor to make more concessions. The EUR already dropped sharply and other markets are also likely to feel the fallout from heightened political risks in the Eurozone’s largest economy. In Asia the weakening equity markets (principally on news of increased regulation in China) and rising risk aversion has continued to spark the Japanese yen.
The EURJPY, is very much in play falling to key support levels around 131.60, (H4 and Daily). Next support at 131.20 and 131.00 will prove important. Today we have already tested 131.15 the H1 needs to recover 131.76 before resistance at 131.95 with support at 131.40 important.
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