empty
25.02.2025 12:21 AM
The Euro Has Become a Victim

It has been a while since EUR/USD experienced such a rapid shift from being a strong performer to a weak one. Investors initially believed that Friedrich Merz, who won the elections, would work wonders and pull the German economy out of its recession. As a result, the exchange rate for this key currency pair rose to two-month highs. However, once it became apparent that this optimism was misplaced, the euro fell sharply.

Multiple factors, including the ongoing conflict in Ukraine, the energy crisis, slowing GDP growth in China, and rising protectionism in the U.S., have transformed Germany from the engine of European growth into one of the weakest economies in the region. The recession projected for 2023-2024, along with the failure of GDP to return to pre-pandemic levels, has significant implications. In this context, the poor performance of the ruling party, Olaf Scholz's Social Democrats, which is their worst outcome since World War II, seems almost inevitable.

Dynamics of the German economy

This image is no longer relevant

Investors viewed Friedrich Merz as a strong leader capable of improving the economy and standing up to Donald Trump. However, as the leader of the Christian Democratic Union, he is not a magician. Without the backing of a solid coalition, he cannot effectively implement fiscal measures, and Germany urgently needs to increase its defense spending. The only viable option is to issue more bonds, something Merz has previously criticized.

Excessive optimism has made the euro vulnerable. Nevertheless, things started off positively. German business confidence in the economy increased, and business activity surged, allowing the European Purchasing Managers' Index (PMI) to remain stable even as the French index fell to its lowest level in 18 months. Additionally, the expectations index from IFO also showed promising results.

IFO Expectations and Current Conditions indices

This image is no longer relevant

The initial faith in Friedrich Merz was strong, but the excitement surrounding the CDU's success quickly dissipated when it became clear that forming a coalition would not be straightforward. The euro had briefly surged above $1.05 multiple times in the past week, but it ultimately couldn't maintain that level and fell back down. If the market doesn't move in the expected direction, does it tend to shift the opposite way?

The results of the German parliamentary elections helped prevent a collapse of the euro, even amidst the worst daily performance of the S&P 500 since mid-December. Typically, a drop in US stock indices indicates a decline in global risk appetite and tends to bolster a safe haven currency like the US dollar. However, that wasn't the case this time.

This image is no longer relevant

What once supported the EUR/USD exchange rate now seems capable of undermining it. Friedrich Merz's struggle to quickly form a coalition contributed to the major currency pair falling to 1.0300.

From a technical perspective, the daily chart of EUR/USD shows a pin bar formation with a long upper shadow. The bulls' inability to generate upward momentum and the pair's return to its fair value range suggest a lack of strength. Furthermore, if the euro falls below $1.0455 and $1.0445, it could signal a selling opportunity.

Seleccione el marco de tiempo
5
min
15
min
30
min
1
hora
4
horas
1
día
1
s.
Gana con los cambios en el valor de las criptomonedas con InstaForex.
Descarga MetaTrader 4 y abre tu primera operación.
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    UNIRSE AL CONCURSO

Recommended Stories

Análisis del par GBP/USD. El 9 de julio. ¿Qué implica la "Ley maravillosa" de Trump?

El par de divisas GBP/USD durante el martes volvió a moverse a la baja, lo cual sigue causando cada vez más sorpresa. Por supuesto, ya hemos dicho en múltiples ocasiones

Paolo Greco 05:22 2025-07-09 UTC+2

Análisis del par EUR/USD. El 9 de julio. ¿Qué juego está jugando Trump con los aranceles?

El par de divisas EUR/USD durante el martes mantuvo un ánimo de corrección. No hubo eventos macroeconómicos en este día, sin embargo, Donald Trump "leyó toda la lista" de países

Paolo Greco 05:22 2025-07-09 UTC+2

Análisis del par GBP/USD. El 8 de julio. Nadie necesita más el dólar, Trump está indignado.

El par de divisas GBP/USD durante el lunes descendió ligeramente, pero todavía no se puede hablar de una tendencia bajista. Desde el punto de vista técnico, el par permanece

Paolo Greco 07:54 2025-07-08 UTC+2

Análisis del par EUR/USD. El 8 de julio. Elegante. Donald Trump prolongó los plazos del "período de gracia".

El par de divisas EUR/USD se negoció durante el lunes con una inclinación bajista, aunque probablemente no hubo motivos de peso para el fortalecimiento del dólar. Recordemos que durante

Paolo Greco 07:54 2025-07-08 UTC+2

Análisis del par GBP/USD. El 7 de julio. El mercado vuelve a posponer sus expectativas sobre el recorte de tasas de la Fed.

El par de divisas GBP/USD también se mantuvo en el mismo lugar durante el viernes, ya que en ese día la sesión comercial estadounidense, en esencia, no funcionaba. No hubo

Paolo Greco 07:26 2025-07-07 UTC+2

Análisis del par EUR/USD. El 7 de julio. Elon Musk crea el «Partido Americano»

El par de divisas EUR/USD estuvo inmovilizado prácticamente todo el día viernes. Esto se explica fácilmente, ya que el viernes se celebró el Día de la Independencia

Paolo Greco 07:26 2025-07-07 UTC+2

Análisis del par GBP/USD. El 3 de julio. Jerome Powell finalmente respondió a Trump.

El par de divisas GBP/USD durante el miércoles se desplomó como una piedra. Sin embargo, cualquier caída del par siempre termina en un crecimiento mucho más fuerte. Por lo tanto

Paolo Greco 07:32 2025-07-03 UTC+2

Análisis del par EUR/USD. El 3 de julio. Una gran ley de Trump aprobada, el dólar en mínimos de 4 años.

El par de divisas EUR/USD durante el miércoles se negoció de manera bastante tranquila, si es que se puede aplicar la palabra "tranquila" a la caída diaria del dólar

Paolo Greco 07:31 2025-07-03 UTC+2

Analisis del par GBP/USD. El 1 de julio. Trump el genio y los estadounidenses ciegos. Parte 2.

El par de divisas GBP/USD bajó moderadamente durante el lunes, lo cual no representa ningún problema para la moneda británica. La libra esterlina puede permitirse tranquilamente perder 100 o incluso

Paolo Greco 07:05 2025-07-01 UTC+2

Análisis del par EUR/USD. El 1 de julio. Trump el genio y los estadounidenses ciegos. Parte 1.

El par de divisas EUR/USD continuó negociándose el lunes dentro de un rango extremadamente estrecho. El lunes hubo pocas noticias, y las que se publicaron no despertaron mayor interés entre

Paolo Greco 07:05 2025-07-01 UTC+2
¿No puede hablar ahora mismo?
Ingrese su pregunta en el chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.