EUR/USD: Interim bottoming is quite possible – OCBC

French lawmakers have voted. Both the left and right wings united to reach a combined vote of 331, well above the 288 simple majority needed. PM Barnier has lost a vote of no-confidence. In Germany, chancellor Scholz is expected to call for a vote of confidence on 11 Dec and the Bundestag will vote on 16 Dec. EUR/USD was last at 1.0527, OCBC’s FX analysts Frances Cheung and Christopher Wong notes.

Daily momentum is mild bullish

“Mr Barnier and cabinet will likely have to resign, and the government goes into caretaker mode. As no legislative elections can be held until 1 year after the last elections (held in July this year), snap election is not possible. The next focus is on Germany. To survive the vote, Scholz would need to receive the support of an absolute majority of 367 votes. But in the event, he fails, then Germany is likely to make way for elections on 23 Feb 2025.”

“And despite the political uncertainties, the EUR has refused to trade much lower. We believe a lot of known negatives are already in the price of EUR – slowing growth momentum, political fallout, ECB cut expectations, etc. EUR bears need a new catalyst to break lower, failing which, shorts could be frustrated.

“We still caution for the risk of short squeeze on any Euro-area positive news or poor US data catalyst. EUR still holds above its lows. Daily momentum is mild bullish while RSI remains flat. Consolidation likely. Resistance at 1.0570 (21 DMA), 1.0610 and 1.0670 (38.2% fibo retracement of Oct high to Nov low). Support at 1.0450 levels before 1.0330.”