EUR/USD: Heavy downward bias on the day – OCBC
|The Euro (EUR) continued to trade lower amid political uncertainties in Germany. Minority government faces economic and diplomatic challenges. EUR was last seen at 1.0612 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
Daily momentum is bearish
“PM Scholz is seeking confidence vote earlier on 16 Dec instead of 15 Jan – but is expected to lose. Snap elections likely planned for 23 Feb. Elsewhere, EUR is likely to bear the brunt of the US election outcome. Trump presidency will result in shifts in US foreign, trade policies.”
“The potential 20% tariff (if implemented) can hurt Europe where growth is already slowing, and that US is EU’s top export destination. EU-UST yield differentials have already widened and may widen further as markets speculate on a dovish ECB, with chatters of 50bp cut at Dec meeting.”
“Daily momentum is bearish while RSI fell. Support at 1.06 levels (2024 low). Breach below this support will open way for further downside towards 1.0450/1.05 levels. Resistance at 1.0740 (76.4% fibo), 1.0810/30 levels (21 DMA, 61.8% fibo retracement of 2024 low to high).”
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