• The announcement of a snap election in France has caused considerable turmoil in the Eurozone.

• The ECB has remained quiet about supporting French markets.

• Markets are still absorbing Fed forecasts for one rate cut this year.

The EUR/USD forecast points to a bearish trend as the euro lingers near a recent low reached last week due to political uncertainty in the Eurozone. At the same time, investors were waiting for more data this week to give clues on the outlook for Fed rate cuts.

The announcement of a snap election in France has caused considerable turmoil in the Eurozone. Investors are concerned that a new government would worsen the country’s financial state. This has weighed on the euro and boosted the US dollar.

At the same time, the ECB has remained quiet about supporting French markets, which have sold off since the announcement. This uncertainty will likely keep the euro on the back foot for some time.

On the other hand, the dollar has remained strong as safe-haven demand rises with the uncertainty in the Eurozone. Moreover, markets are still absorbing Fed forecasts for one rate cut this year in December. Notably, on Sunday, Fed’s Neel Kashkari supported this outlook, saying it was reasonable to cut rates once. This has reversed moves after softer-than-expected US inflation.

Nevertheless, market participants are pricing in the possibility of a rate cut in September since the economy is showing signs of slowing down. A survey on Friday showed a significant decline in US consumer sentiment amid inflation concerns. Meanwhile, another report showed a decrease in US import prices, supporting the view that inflation is easing. Traders are awaiting data on retail sales and flash PMIs later this week.

EUR/USD key events today

• Empire State manufacturing index

EUR/USD technical forecast: Price trends downward after consolidation

On the technical side, the EUR/USD price is in a bearish trend after breaking out of its consolidation area. Previously, it had been caught between the 1.0800 support and the 1.0900 resistance level. However, when bulls tried to break out of the range, they failed and the RSI made a bearish divergence, indicating weaker bullish momentum.

After this, bears took over with enough strength to break below the 1.0800 range support. Currently, the price is trading in a new bearish channel. Furthermore, bears recently broke below the 1.0725 critical level, a sign that the price could continue lower.

https://www.forexcrunch.com/blog/2024/06/17/eur-usd-forecast-sellers-regain-amid-political-uncertainty/