EUR/USD: Bears Are In Full Control

• EUR/USD remains depressed as the US and China draw further apart.
• Tension towards the European elections also weigh.
• The technical outlook is bearish for the currency pair.

EUR/USD has the blues this Monday morning. The trade war between the US and China is not going away and even getting worse as Google is limiting its interactions with Huawei, the Chinese telecommunications giant. The search engine firm and other major US companies are acting in response to President Donald Trump's blacklisting of the firm. The administration said that its motives are related to security but it is impossible to separate the moves against Huawei from the broader trade picture 

The US dollar is gaining some ground on the damp market mood, and the euro is in retreat. And the common currency has its own reasons to fall. Around 400 million people are eligible to vote in the elections to the European Parliament that begin on Thursday and end on Sunday and the campaign is heating up.

Matteo Salvini, Italy's interior minister, and the de-facto PM held a well-attended rally with other far-right nationalistic parties in Milan over the weekend. Such parties are projected to gain ground in the elections and could shape future EU policy and critical nominations such as the next president of the European Central Bank. If Europe leans more towards populism, the euro may extend its losses.

Another weekend development was the collapse of the Austrian government due to a corruption scandal. Political instability, which is not a feature limited to the small mountain nation, also weighs on the euro.

The calendar is relatively light with the German Bundesbank monthly report and a speech by Fed Vice Chair Richard Clarida due later in the day. Euro/dollar is set to move by fresh developments in the trade war and preparations for the elections. Later this week, the Fed's meeting minutes and fresh European business survey will have their say.

EUR/USD Technical Analysis

EUR/USD is trading below the 50, 100, and 200 Simple Moving Averages on the four-hour chart and momentum remains to the downside. To top it off, the Relative Strength Index is just above 30, thus not indicating oversold conditions. 

The technical outlook is decidedly bearish. 

EUR/USD hit a low of 1.1150 today, the lowest since early May. Support awaits at 1.1135 which is this month's trough. The 2019 low of 1.1110 is next. Below, 1.1025 is a line dating back to 2017.

Some resistance awaits at the high of the day so far at 1.1170. The next cap is 1.1200 which provided support last week and both the 50 SMA and the 200 SMA are converging towards it. Next up we find 1.1225 that held EUR/USD down last week, and it is followed by 1.1250 and 1.1265 that limited gains during May.

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