EURUSD responded to the 2017 German Election results in the market open.

EURUSD rates responded to Chancellor Angela Merkel and the Christian Democratic Union (CDU) having a disappointing result in the 2017 Election in Germany on September 24.  Merkel’s party lost a substantial amount of seats and so did the Social Democratic Party (SPD) while the Alternative for Germany (AfD) and Free Democratic Party (FDP) gained a significant number of seats in the German Parliament.  Angela Merkel won a fourth term as Chancellor, but she will have a tough time building a coalition as she is expected to go the so-called “Jamaica” route that will involve a CDU-FDP-Greens majority coalition.  This could take some power away from Merkel and hand it to Christian Lindner, the leader of the FDP.

The 2017 German Election Projected Results

EURUSD German Election 2017

The Current Parliament (Bundestag)

EURUSD German Election 2017

This will be a dramatic shift in the power structure in the German Parliament as the status quo has been shifted significantly.  Eastern Germany favored the AfD Party considerably while the CDU lost the most voters to FDP.  Most disaffected CDU voters wanted liberal, free market policies and they were not getting it from Merkel.  While migration was a big issue for those swinging toward AfD, the CDU voters shifting to the FDP want less regulation and taxation.

How did the EURUSD react to the prospect of a more humbled Angela Merkel?

A sell-off.  A nice gap down for the EURUSD on the Wellington Open.

EURUSD German Election 2017

It was a 48 pip gap drop for EURUSD and then it was followed by short drop further that would not enter the demand zone high water mark of 1.1891.  The rate would rise significantly after not having the courage to fall further and it would continue to rise.  The gap has yet to be filled completely.

EURUSD German Election 2017

Since 5:40 PM Eastern Time (New York), there has been momentum shifting toward Euro strength for this currency pair.