EUR/USD forecast: Bearish bias remains, seems all set to challenge yearly lows

The EUR/USD pair weakened farther below the 1.1200 handle on Friday and ended the week on a downbeat note, snapping two consecutive weeks of winning streak. The shared currency did witness a minor intraday bump after a White House statement said that the US President Donald Trump has delayed a decision on imposing tariffs on cars made by the European Union for 180 days. The uptick, however, turned out to be short-lived amid concerns over fiscal risks related to Italy, particularly after the country's Deputy Prime Minister Matteo Salvini said that the government is ready to break the EU's ceiling of 3% debt-to-GDP ratio.

The pair finally settled near the lower end of its weekly trading range and was further pressurized by a follow-through US Dollar buying interest. Against the backdrop of persistent worries over US-China trade tensions, the greenback got an additional boost from the upbeat release of prelim UoM consumer sentiment index, which jumped to 102.4 in May and marked the highest level in fifteen years. 

The pair held on the defensive at the start of a new trading week, hitting 2-1/2 week lows during the Asian session in reaction to the German finance ministry’s monthly report - released over the weekend, that said the external risks for the economy remain high and so the manufacturing outlook is likely to remain subdued. Hence, the key focus will be on this week's key releases of the widely tracked Euro-zone and German preliminary PMIs, scheduled for release on Thursday. Apart from this, the release of the latest FOMC Meeting Minutes, due on Wednesday will further contribute towards determining the pair's next leg of a directional move. 

In the meantime, the USD price dynamics might continue to play an important role in determining the pair's momentum on Monday amid absent relevant major market-moving economic releases - either from the Euro-zone or the US. 

From a technical perspective, the pair remains vulnerable to aim towards challenging yearly lows support near the 1.1110 region, though the 1.1335 level might act as an intermediate support. Sustained weakness below the mentioned supports might accelerate the slide towards testing a four-month-old descending trend-channel support, currently near the 1.1030 region. On the flip side, immediate resistance is pegged near the 1.1190-1.1200 region - marking a short-term ascending trend-line support break-point, above which a bout of short-covering might lift the pair towards the 1.1230 resistance en-route the 1.1260 supply zone.