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Europe uncertainty holding back EUR bulls

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The EURUSD pair edged higher in early Asian trading on Tuesday and is currently in the 1.0765-1.0770 range, albeit lacking strong follow-through buying.

Moreover, the fundamental backdrop and the technical setup warrant some caution before positioning for an extension of the previous day’s modest rebound from the 1.0735-1.0730 region, or a one-month low.

The US Dollar remains well supported by growing acceptance that the Federal Reserve might keep interest rates higher for longer, bolstered by the stronger-than-expected US jobs data released on Friday.

Adding to this, French President Emmanuel Macron’s decision to call snap elections later this month increased political uncertainty in the Eurozone’s second-biggest economy, which might continue to undermine the shared currency. This, in turn, favours bearish traders and validates the near-term negative outlook for EURUSD.

From a technical perspective, the post-NFP fall below the 100-day Simple Moving Average (SMA) near the 1.0800 mark and a subsequent breakdown through the 200-day SMA adds credence to the negative outlook amid bearish oscillators on the daily chart.

Hence, any further move up might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly near 1.0800. The said handle should act as a pivotal point, which if cleared decisively might prompt a short-covering rally towards the 1.0865-1.0870 supply zone en route to the 1.0900 mark.

(Source: OANDA)