- The announcement of snap elections in France caused considerable turmoil in the Eurozone.
- The ECB has remained silent on support for French markets.
- Markets are still absorbing the Fed’s forecast of one rate cut this year.
The EUR/USD forecast indicates a bearish trend as the Euro remains close to the recent lows reached last week due to political uncertainty in the Eurozone. At the same time, investors were waiting for more data this week to give clues about the prospects for a Fed rate cut.
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The announcement of snap elections in France caused considerable turmoil in the Eurozone. Investors are worried that the new government would worsen the country’s financial situation. This weighed on the euro and boosted the US dollar.
At the same time, the ECB remained silent on support for French markets, which have sold off since the announcement. This uncertainty is likely to keep the euro on the back burner for some time to come.
On the other hand, the dollar remained strong as safe-haven demand rises with uncertainty in the Eurozone. Moreover, markets are still absorbing the Fed’s forecasts for one rate cut this year in December. Notably, on Sunday, the Fed’s Neil Kashkari backed up this forecast, saying it was reasonable to cut rates once. This reversed moves following softer-than-expected US inflation.
Nevertheless, market participants are assessing the possibility of a rate cut in September, as the economy shows signs of slowing down. A survey conducted on Friday showed a significant drop in US consumer sentiment due to inflation concerns. Meanwhile, another report showed a decrease in US import prices, supporting the view that inflation is easing. Traders await data on retail sales and flash PMIs later this week.
EUR/USD key events today
- Empire State Manufacturing Index
Technical Forecast EUR/USD: Price trends downward after consolidation
On the technical side, the EUR/USD price is in a bearish trend after breaking out of the consolidation area. Earlier, it was caught between support at 1.0800 and resistance level at 1.0900. However, when the bulls tried to break out of the range, they failed and the RSI made a bearish divergence, indicating weaker bullish momentum.
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After this, the bears took enough strength to break below the support of the 1.0800 range. Currently, the price is trading in a new bearish channel. Moreover, the bears recently broke below the critical level of 1.0725, which is a sign that the price could continue lower.
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