EUR/JPY hit 2-month low as German coalition talks collapse

• EUR/JPY hit a 2-month low of 131.17 in Asia.
• German coalition talks collapse.
• Merkel's fourth term in doubt, is re-election on cards?

The German coalition talks collapsed as the Free Democrat Party (FDP) left the negotiating table. It remains to be seen if Merkel approaches Social Democrats or attempts forming a minority government with the Greens. Also, re-election cannot be ruled out as well.

Consequently, the common currency is on the back foot today. The EUR/JPY pair hit a two-month low of 131.17 in Asia before regaining some poise to trade around 131.70 levels. As of writing, the cross is still down 0.36 percent on the day.

Elsewhere, the weakness in the treasury yields is helping the Yen explore upside against most majors. Ahead in the day, the EUR/JPY may fall well below the session low of 131.17 if the European equities react negatively to the political instability in Germany.

EUR/JPY Technical Levels

A break below 131.21 (100-day MA) would expose 130.60 (Sep. 15 low) and 130.00 (psychological level). On the higher side, break of resistance at 132.05 (1-hour 10-MA) would open up upside towards 132.55 (1-hour 200-MA) and 132.81 (downward sloping 1-hour 100-MA).