EUR/USD slid on Monday and was hovering just above its low for the month and with German elections, central bank expectations and technicals conspiring to limit any near-term gains.
The Social Democrats' narrow victory in Germany's elections could lead to a drawn-out coalition-building process nL8N2QT0HW, causing uncertainty for investors, who might turn cautious on the euro as they await clarity.
Also weighing on EUR/USD, short-term interest rate futures markets indicate investors expect the Fed to be much more aggressive with rate hikes than the ECB.
Futures prices show that out to June 2025 investors expect the Fed to hike rates by nearly 160bps while they expect the ECB to raise only about 50bps.
Technicals highlight downside risks for EUR/USD.
The pair is currently consolidating losses from the Sept.
Daily and monthly RSIs imply downside momentum.
The pair trades below the daily cloud as well as a slew of daily moving averages and September's monthly inverted hammer indicates shorts are in charge.
A move to support near 1.1600 or possibly lower still seems likely.
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