EUR/USD Forecast: Opens with a bearish gap on German elections upset, Italian budget in focus

The US Dollar snapped a three-day of losing streak and staged a modest rebound from two-week lows on Friday, still ended the week broadly lower. The uptick seemed rather unaffected by the softer-than-expected release of prelim UoM US consumer sentiment index, coming in at 99.0 for October as against 100.1 previous and 100.4 anticipated. Meanwhile, the EUR/USD pair stalled its recovery move from seven-week lows and faced rejection near 50-day EMA. The pair retreated from an intraday high level of 1.1611 and eroded a major part of precious session's goodish up-move. 

The pair extended its retracement slide and opened with a bearish gap at the start of a new trading week, albeit now continues to find some support near the 1.1535 region. The shared currency was weighed down concerns over Italy's fiscal policies and the latest political development in the Euro-zone's largest economy, wherein German Chancellor Angela Merkel's arch-conservative CSU allies suffered historic losses in Bavaria state elections on Sunday and rattled her fragile three-party coalition government. 
The Italian cabinet is due to meet on Monday to approve a 2019 budget and confirm the budget deficit target of 2.4% of the gross domestic product. Italy must send its planned fiscal framework to Brussels and the European Commission might reject it or ask for changes, setting up the stage for a possible clash and keep exerting some downward pressure on the common currency. 

From a technical perspective, the bearish bias will be further reinforced below the 1.1530-20 region, a support marked by 23.6% Fibonacci retracement level of the 1.1815-1.1432 recent decline. A convincing break below the mentioned support might turn the pair vulnerable to break through the key 1.1500 psychological mark and head towards testing its next support near the 1.1465 horizontal zone. 

On the upside, immediate resistance is now pegged near the 1.1580 region (38.2% Fibonacci retracement level). This is followed by 100-day SMA barrier, currently near the 1.1615 area, which nears 50% Fibonacci retracement level and hence, should act like a tough nut to crack, at least for the time being.