EUR/USD: Broader fundamental outlook remains supportive of the Euro – OCBC

Euro (EUR) drifted lower, amid broad US Dollar (USD) rebound. Lingering political uncertainties due to French budget/government, hung parliament outcome in Dutch elections, French CPI underwhelmed, were among some of the factors weighing on EUR. EUR last seen at 1.1514 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Risks skewed to the downside

"On French politics, though PM Lecornu may have survived 2 rounds of no confidence motions and won some support from Socialist party (PS) in agreeing not to topple the government, the situation remains fragile. A left-wing bloc led by PS, Communist and Green parties is now demanding for a 'Zucman tax' of 2% on wealth over EUR100mio.

"Lower house had voted against it (228 to 172) and this renewed disagreement may prove challenging for lawmakers to agree on a budget or worst, risk another government collapse. Political developments may still pose downward pressure on the EUR in the near term. However, the broader fundamental outlook remains supportive of the Euro, suggesting a bias for buy-on-dips approach (with patience)."

"Daily momentum turned mild bearish but RSI fell. Risks skewed to the downside. Support at 1.1460 (38.2% fibo retracement of Apr low to Sep high), 1.1320 (200 DMA, 50% fibo). Resistance at 1.1630/40 (21 DMA, 23.6% fibo), 1.1670/80 (50, 100 DMAs)."