EURUSD Heads South As Eurozone Politics Continue Exerting Pressure

Summary:
• The EURUSD is in a precarious position, with the European Parliamentary elections extending its impact in the markets ahead of US retail data

EURUSD declined on Tuesday, trading at 1.0719 in the European session after losing 0.1 percent. With that move, it erased a third of its Monday gains and traders position themselves for the release of US retail sales data.

The euro remains under pressure from the uncertainty surrounding the French political landscape after Marine Le Pen’s National Rally (RN) won the European Parliamentary elections, triggering President Emmanuel Macron to call for snap elections. Many investors are concerned about drastic policy shifts should the RN win the July elections, and the sentiments are likely to keep the EURUSD pair suppressed.  

Meanwhile, the Eurozone Consumer Price Index (CPI) came in at 0.4 percent in May, matching analysts’ forecasts. The corresponding annualized figure was 2.9 percent, up from 2.7 percent in April. That supports the ECB’s reluctance to trim interest rates further until it gets satisfied that inflation has been contained, and will provide support to EURUSD. Also, the currency pair will be favoured by the rise in the ZEW Economic Sentiment Index, which rose to 51.3 percent, beating the forecast figure of 47.8. That signals a general confidence about the EU’s economic health, notwithstanding the political pressures in the region.

Traders will turn their attention to the US retail sales figures for May to get cues on the likely EURUSD price trajectory on the daily chart. Also, US Industrial Production figures will action will weigh in later in the day, and could inject fresh volatility into the market.

Technical analysis

The momentum on EURUSD currency pair favours the sellers, and the downside will likely continue if resistance remains at 1.0718. That will likely see the first support established at 1.0713, and extended control by the sellers see the action move lower to test 1.0708. Conversely, a move above 1.0718 will favour the buyers to take control, and the upward movement will likely meet the first resistance at 1.0723. A break above that mark will invalidate the upside narrative and potentially move the pair further up to test 1.0727.