EUR/USD Forecast: Already 200 pips off the lows, how high can it run?

• The EUR/USD is having a good start to the week after ending the previous one higher, already 200 pips off the lows.
• Calm in Italy and hopes for further upbeat figures support the Euro.
• The technical picture remains bearish despite the recent stability.

The EUR/USD is up above 1.1700 after closing the previous week on the higher ground. After losing more than 1,000 pips peak to trough, these rises are a welcome change for the common currency.

This is the first full week with new governments in Italy and Spain. Italy's political crisis raised fears of a euro-zone exit or "Italexit" as a potential new round of elections would have been seen as a de-facto plebiscite on the Euro. Eventually, a compromise between the League, the 5-Star Movement, and the President led to the formation of a government. Giuseppe Conte will lead a populist government that may challenge Europe on migration and budgetary rules. Italy's issues are far from over.

In Spain, the pro-European minority center-right PP government was replaced by a pro-European minority center-left PSOE government. The transition went smoothly. New elections are expected in the not-so-distant future in Spain, but the country is staunchly pro-European. Nevertheless, instability may weigh on the common currency at some point. Spain saw a drop of 83,700 unemployed persons in May, slightly fewer than expected. 

The Sentix Investor Confidence is projected to show another small drop in confidence, but after some figures surprised to the upside last week, it would not be surprising to see a bounce in investor confidence. 

In the US, markets are still digesting the Non-Farm Payrolls report on Friday. The economy gained 223,000 jobs, better than expected. In addition, wages rose by 0.3% MoM, better than projected. Year over year, an increase of 2.7% was seen. The upbeat data cements a Fed rate hike next week if anybody had any doubts. Trump somewhat stole the show but the fundamentals have not changed.

Later in the day, US Factory Orders are projected to drop after increasing by 1.6% last time. However, the broader focus remains on global trade. The steel and aluminum tariffs that the Trump Administration imposed on the EU, Canada, and Mexico continue having ramifications on markets. It may trigger flows to the safe-haven yen, and to a lesser extent, to the US Dollar. 

EUR/USD Technical Analysis

While the pair broke above the steep downtrend resistance line, Momentum points to the downside. In addition, the RSI is around 40, also leaning lower and outside the oversold territory. 

1.1725 was the high seen on May 28th and may serve as the first battle line. Further up, 1.1767 was a line of support on the way down. It is followed by the May 9th trough of 1.1822. 

Looking down, 1.1648 was the low on May 25th and could provide some support. Lower, 1.1610 was a swing low on June 1st. Further down, 1.1550 was the November low and 1.1510 is the fresh 2018 trough.

More: EUR/USD well-supported for a change, but can it rise? — Confluence Detector