EUR/USD consolidates rally to 1.12 handle

• EUR/USD is steady in the open this week so far, consolidating the rally to 1.12 handle.
• EUR/USD currently trades at 1.1210, between 1.1203/11. 

EUR/USD has soaked up the European elections ahead of a U.K. and U.S. holiday making for a likely quiet Monday all around. Just taking a quick glance at the positioning data for the week ending 21 May 2019, funds were buyers of EUR but asset managers were sellers. Looking ahead, US-China trade developments, Fedspeak, US stock and Treasury yield movements will be key drivers of USD positioning where funds have pared their net USD longs while asset managers reduced their net USD shorts.

There were no particular highlights from the weekend news, although there was an antagonist with respect to the Sino/US trade standoff which could keep a lid on risk appetite in the immediate future whereby China sees the US calling on China to limit the development of its state-owned enterprises as an "invasion" on its economic sovereignty.

European elections

Robert Carnell, Chief Economist Head of Research, Asia-Pacific, summarised as follows:

• This was not a ringing endorsement for Euroscepticism - with only 22% of the seats going to EU sceptical parties, and even this bolstered by what may be a temporary surge in the UK's Brexit party seats, the EU parliament remains a largely pro-European institution.
• The Coalition of EPP (European People's Party) and S&D (Socialist and Democrat) has faltered, with both parties losing seats. Likely coalitions are probably with the ALDE (Liberals and Democrats, included Macron's En Marche) or Greens.
• In fact, talking of the Greens, the environment seems to have done well out of the vote, with the Greens picking up seats. May help their chances of acting as Kingmakers...? 
• The Brexit party did very well in the UK -  suggests the next Conservative leader will need to be very "Brexity" (though that may spur a vote of no-confidence and an election)
• In Greece, Syriza called an election, after they came second to conservatives in the election.
• In Italy, Lega did well, but not quite well enough to oust Five-Star from the government and have a go at running on their own. Lega leader, Matteo Salvini, says nothing will change...but watch this space...Salvini does, however, want to change the EU's fiscal rules and is looking for allies to support his cause.
• The results don't offer much insight into who will lead the EU Commission. The EPP's candidate, Manfred Weber may still get the nod, despite his party's losses, in which case, you can more or less rule out Jens Weidmann as the next ECB President. But nothing is clear at this stage. 

EUR/USD levels

Valeria Bednarik, The Chief Analyst at FXStreet, explained that from a technical point of view, the pair settled around the 61.8% retracement of its latest bearish move:

"In the daily chart, the potential upward seems limited, as, despite the pair settled above its 20 SMA, it continues developing far below the 100 and 200 SMA, both far above the current level and maintaining their bearish slopes. Technical indicators in the mentioned chart aim modestly higher, currently in neutral levels just around their midlines. Shorter term, and according to the 4 hours chart, the technical picture is quite alike, as the pair settled above its 20 and 100 SMA but was rejected by sellers aligned around the 200 SMA, while technical indicators hold within positive levels, but having already lost their positive momentum."