EUR/USD: The next big break is through 1.20 – TDS

The German elections offer some excellent event risk for the euro. Meanwhile, the EUR/USD pair is set to hold 1.17 to 1.20 near-term but economists at TD Securities recommend buying dips for an eventual 1.20 break.

Who will be German chancellor on 31 December?

“The Greens are likely to play a central role in the upcoming government, and it seems increasingly likely that Olaf Scholz will become German Chancellor. This backdrop would likely be supportive for the EUR over the medium-term, especially as it may change the context of German fiscal spending.”

“A Green/SPD coalition is more growth-friendly than the current CDU/CSU. That would be a EUR tailwind, especially as Europe scores favorably on our growth framework. 

“We think EUR/USD holds the 1.17-1.20 range, but the next big break is through 1.20 rather than a push to 1.15.”