- The EUR/USD exchange rate has come under pressure as political uncertainty in the Eurozone rises again, with some analysts expecting increased downward pressure in the short term.
- According to Forex trading, the EUR/USD price dropped to the support level of 1.0732 at the start of trading this week, hitting its lowest in a month, before settling around the 1.0765 level at the time of writing this analysis.
The euro has recently fallen sharply after the European Parliament elections strengthened the position of parties skeptical of greater European integration. In response, analysts at XM.com wrote that “socialist, liberal and centrist parties are likely to maintain their majority in the European Parliament, but the rise of eurosceptic nationalists is likely to make it more difficult for lawmakers to agree and move forward on reforms and policies that would give the EU more powers.”
According to the election results, far-right and far-right parties are expected to win almost a quarter of the seats when the next European Parliament opens, up from a fifth in 2019. “There’s still a long way to go, but the implications are clear,” Rabobank analysts said. “This is the most right-wing European Parliament ever, while the centrists maintain their majority,” they added. For analysts and the market at large, it’s what’s happening in France that’s the most worrying. Moreover, most are expecting a shift to the right in these elections, and the election results suggest that Ursula von der Leyen’s European People’s Party will still have a majority in the European Parliament. But it’s what’s happening in France that’s making the headlines. French President Emmanuel Macron made the “shocking decision” to call early parliamentary elections after his centrist coalition lost the European Parliament elections to Marine Le Pen’s far-right movement. Some analysts say they don’t agree with Macron’s risk appetite. The euro is the worst performing G10 currency, trading at 1.075 at the time of writing.
With Macron’s party receiving only 15% of the vote, he decided to hold parliamentary elections on June 30, with a second round on July 7. As a result, the move is widely seen as a gamble to either ask French voters whether they really want a far-right government, or to give them three years of experience with one before the next French presidential election in 2027.
As for the euro’s future direction, some analysts point out that the euro could fall to the 1.0700/0720 area once U.S. investors have had a chance to fully assess the European political situation.
Apart from politics, US inflation figures are due to be released mid-week, and if they also come in ahead of market expectations, this will put further pressure on the EUR/USD price. In this regard, Asmara Jamal, an economist at Intesa Sanpaolo, said: “Absent any major negative surprises in the US inflation figures, the euro may struggle to rise again and be on the defensive.”
EUR/USD Technical Analysis and Forecast:
The overall trend of EUR vs USD remains bearish and is likely to remain so as long as it remains stable below the support level of 1.0800. Technically, the bears are likely to maintain the upper hand pending the release of the US inflation rate, the tone of the US Federal Reserve’s policy statement and the reaction of Bank of Japan Governor Jerome Powell. Currently, the nearest support levels for the EUR/USD trend are 1.0700 and 1.0630, a breach of the latter level would confirm the upper hand of the bears while simultaneously moving the technical indicators towards a strong oversold level.
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