After a massive 400 pip rally over the past week, the euro finally ran into a wall at the 1.2300 level. The pair sold off all night long in Europe and early North American trade on news that the Merkel-SPD coalition talks have hit a snag. As we noted earlier, “So far only the Berlin and Saxony-Anhalt regions have voted against the deal. With opposition coming mainly from East German locales SPD leader Schultz has until Sunday to line up the votes and get the deal done. If the coalition talks fail, EURUSD will no doubt see a gap down open on Sunday, but it hard to say whether the political turmoil will have any long-term impact on the euro itself.

The German economy has been operating very well this year and Ms. Merkel could presumably govern in a minority rule if need be.”

Still, with ECB getting worried about the quick pace of euro appreciation the single currency may have trouble forging ahead, but for now, the trend remains up and unless the pair gives up the 1.2200 figure on a closing basis it may be premature to call the top in the move.