"Worst Case" Averted In German Elections, Now Coalition Negotiations Begin

EUR/USD stuck to a narrow trading band during Asia-Pac dealing, with the German Federal election seeing the SPD receive a slightly slimmer than expected advantage in terms of the overall vote count (see earlier bullet for more colour on the matter), with coalition negotiations now set to get underway.

• It would seem that the 'traffic light' and 'Jamaica' coalitions are the two most probable outcomes (in that order), while the most destabilising potential outcome from a policy perspective, a tri-party leftist coalition, has been avoided. This has allowed the rate to settle into the aforementioned narrow range, last dealing virtually unchanged just above $1.1720.
• Recent sessions have seen 3-month EUR/USD implied vol move back towards the cycle lows registered earlier this month.
• Initial resistance comes in at the 20-day EMA ($1.1772), with any break above there set to switch focus to the Sep 14 high ($1.1846). Initial support is seen at the Sep 23 low ($1.1684), below there would expose the Aug 20 low/bear trigger ($1.1664).
• In terms of nearby FX options expiries to be cognisant of come today's 10AM cut we have: $1.1750-65 (EUR1.3bn).
• Central bank speak from ECB's Lagarde & de Cos headline the European docket on Monday.