EUR/USD Price Forecast – EUR/USD Likely To Remain Bearish Owing to Political Issues in Germany

The EUR/USD picked up a bid on Friday, courtesy of broad-based losses in the greenback. However, the technical setup still remains bearish as 5, 10, and 21-day exponential moving averages (EMAs) are trending south. The 14-day relative strength index (RSI) and the MACD remain biased toward the bears. Further, the stock markets may remain on the defensive today, keeping the greenback well bid, as the Shanghai Composite fell 1% in Asia and the USD/CNH is looking north. Moreover German Chancellor Merkel and her governing party allies lost significant support in Hesse elections while the Greens’ share of the vote doubled. Merkel’s ally blamed bitter infighting in Berlin for massive losses to both the chancellor’s conservative party while the center-left and has threatened to quit the coalition.

Merkel’s Position At Disadvantage Owing to Poor Election Results

As of writing this article, EURUSD pair is trading near flat at 1.1395 down by 0.06% on the day. This is bad news for the common currency as Merkel’s weakness at home may limit her capacity to negotiate a Brexit deal and tackle the Italian budget crisis. Moving forward the pair faces high level of bearish pressure as evident from dovish closing last week and continued cautious stance over the weekend.  On release front, European calendar remains relatively silent except for release of EU economic forecast and Finnish Consumer & Industrial confidence data but they are expected to have very little impact on common currency’s price action.

On US calendar, market will see release of Core PCE Price index, PCE Deflector data and personal spending data which are expected to create some amount of volatility during North American market hours. The only factor that could put a bid under the EUR/USD is a sustained risk aversion in the US stocks, which could force markets to scale back the expectations of Fed tightening. When looking from technical perspective, in then 4 hour chart, the upside seems limited, as the pair settled around a bearish 20 SMA, while technical indicators decelerated their advances after reaching their midlines, where they currently stand.. Expected support and resistance levels are at 1.1336, 1.1300, 1.1275 and  1.1411, 1.1430, 1.1460 respectively.