EUR/USD Forecast: Bears pause but hold the grip

EUR/USD Current price: 1.0714

• European political woes continue to undermine demand for the Euro.
• European Central Bank President Christine Lagarde watching financial markets.
• EUR/USD trades marginally higher on Monday, despite US Dollar's broad strength.

The EUR/USD pair trades at around 1.0710 ahead of the United States (US) opening, marginally higher at the beginning of the week. The pair advances despite the US Dollar retaining its latest strength against other major rivals and European political turmoil. Following French President Emmanuel Macron's call for a snap election, the Marine le Pen far-right party continues to lead surveys. Le Pen said that should her party win parliamentary elections, she will not seek President Emmanuel Macron's resignation. "I'm respectful of institutions; I do not call for institutional chaos," Le Pen told local media.

Meanwhile, European Central Bank (ECB) President Christine Lagarde said that the ECB pays close attention to the smooth functioning of financial markets at an event in France, subtly referring to the French snap elections coming on June 30.

Data-wise, the Eurozone released Q1 Labor Cost, which rose 5.1%, much higher than the previous 3.4% and above the 4.9% expected. Across the pond, the US published the New York Empire State Manufacturing Index, which improved to -6 in June from -15.6 in the previous month.  

EUR/USD short-term technical outlook

From a technical point of view, EUR/USD is at risk of falling further. The pair hovers around Friday's close, and the daily chart shows it remains below all its moving averages, with the 20 Simple Moving Average (SMA) gaining downward traction above directionless 100 and 200 SMAs. Furthermore, technical indicators consolidate within negative levels without signs of a certain directional interest.

In the near term, and according to the 4-hour chart, the chance of an upward extension seems limited. Technical indicators recovered from oversold readings, but their bullish momentum is limited while they remain far below their midlines. Finally, a firmly bearish 20 SMA extends its slide below the longer ones, providing dynamic resistance at around 1.0750.

Support levels: 1.0710 1.0665 1.0620

Resistance levels: 1.0750 1.0800 1.0840