Market Analysis

On Monday, the EUR/USD currency pair continued its downward trend, reaching 1.0750. The Euro weakened significantly due to political instability in the Eurozone, following French President Emmanuel Macron's call for a snap election. Macron’s unexpected announcement on Sunday evening came after exit polls showed Marine Le Pen’s far-right National Rally (RN) securing 32%-33% of the seats in the European parliamentary elections under the leadership of Jordan Bardella, doubling the seats compared to Macron’s centrist list.

Macron, addressing the nation after announcing the snap election, expressed his trust in the democratic process, stating, “I have confidence in our democracy, in letting the sovereign people have their say. I’ve heard your message, your concerns, and I won’t leave them unanswered,” as reported by The Guardian. However, there are concerns that if Macron’s party suffers greater losses than the exit polls predict, it could further deepen the uncertainty surrounding the Euro's future.

Monetary Policy Concerns

On the monetary policy front, European Central Bank (ECB) policymaker and President of the Deutsche Bundesbank Joachim Nagel highlighted persistent inflation concerns, particularly in the service sector driven by strong wage growth. The apprehension that inflation might remain stubborn suggests that any policy easing by the ECB would be gradual.

ECB President Christine Lagarde, following a 25 basis point cut to the central bank’s Deposit Facility Rate to 3.75%, emphasized that the bank is not committed to a specific interest-rate path and will remain data-dependent as inflation trends may remain volatile in the coming months.

Technical Analysis: EUR/USD Enters Bearish Trend

In technical terms, EUR/USD has re-entered the Symmetrical Triangle formation on the daily chart after failing to maintain a breakout, indicating a false move and a shift to a bearish trend. The pair is expected to find support near the upward-sloping trendline of the pattern, originating from the October 3, 2023 low of 1.0448, around the 1.0636 level.

The long-term outlook for the pair has also turned negative as it falls below the 200-day Exponential Moving Average (EMA), currently around 1.0800.

The 14-period Relative Strength Index (RSI) has sharply dropped to 40.00. A decisive break below this level could trigger further bearish momentum.

Paraphrasing text from "FX Street" all rights reserved by the original author.