EUR/USD Price Forecast: Battling to retain the 1.1600 mark in a risk-averse environment

EUR/USD Current price: 1.1611

• Political woes in France undermine demand for the Euro.
• The United States government shutdown continues, denting the market’s mood.
• EUR/USD is technically bearish, but the downward momentum is limited.

The EUR/USD pair consolidates weekly losses in an otherwise quiet Thursday, hovering around the 1.1600 level. The pair bottomed at 1.1598 on Wednesday, amid persistent US Dollar (USD) demand in a risk-averse environment.

On the one hand, the United States (US) government shutdown continues, after yet another round of failed votes in the Senate, as neither the Republican nor the Democratic bill was able to gather enough support. On the other hand, political noise in France keeps weighing on the market’s mood and particularly on the Euro.

The recently elected Prime Minister (PM), Sébastien Lecornu, resigned at the beginning of the week, although President Emmanuel Macron asked him to remain in office and try to form a coalition government. However, far-right leader Marine Le Pen said she would thwart any action by a new government, calling for snap elections.

Other than that, the Federal Open Market Committee (FOMC) released the Minutes of the September meeting on Wednesday. The document showed that policymakers are divided over the interest rate-cut path, which did not surprise investors. The minutes were tilted to the dovish side, temporarily pushing the USD lower.

The American session will feature Federal Reserve (Fed) speakers, and little else, given the federal shutdown.

EUR/USD short-term technical outlook

From a technical point of view, the daily chart shows that EUR/USD is developing a few pips below a mildly bullish 100 Simple Moving Average (SMA), while the 20 SMA gains downward traction above the longer one. It is the first time the pair pierces the 100 SMA since early in March, suggesting the risk of a more sustained decline has increased. Technical indicators, in the meantime, remain within negative levels, although the Momentum indicator stands directionless, suggesting cautious speculative interest.

The 4-hour chart shows that the EUR/USD pair is at risk of extending its slump. A firmly bearish 20 SMA has accelerated its slide below the longer ones, now providing dynamic resistance at around 1.1650. Finally, technical indicators have lost their downward slopes, but hold well below their midlines, skewing the risk to the downside without suggesting an imminent bearish breakout.

Support levels: 1.1590 1.1550 1.1510

Resistance levels: 1.1650 1.1690 1.1725