EUR/USD Forecast: Turning Bearish Again, 1.1700 Important Support Eyed

The EUR/USD pair had good two-way moves on Monday as investors assessed the latest German political turmoil. The pair initially dropped to 1.1722 level after coalition talks in Germany collapsed, but managed to recover and reach a daily high level of 1.1808 on the back of a turn in the sentiment. The recovery move, however, turned out to be short-lived and was further weighed down by some dovish comments by the ECB President Mario Draghi.

Meanwhile, German President Frank-Walter Steinmeier urged parties to return to the negotiating table and cooperate to avoid new elections. However, given that Chancellor Angela Merkel has already expressed her preference towards fresh elections over forming a minority government, political deadlock continued exerting downward pressure on the shared currency through the NY trading session on Monday.

The pair is now finding decent support near the 1.1725 region and any subsequent weakness below the mentioned support is likely to be limited by a descending trend-line resistance break point, now turned support, near the 1.1700-1.1695 region. Meanwhile, the pair now seems to be struggling to build on its momentum beyond the downward sloping 50-day SMA hurdle and short-term technical indicators are also now pointing to any firm directional bias. Hence, it would be prudent to wait for a decisive break through the mentioned range before determining the pair's next leg of directional move.

A convincing break below the 1.1700 handle would negate any near-term bullish bias and turn the pair vulnerable to resume with its prior depreciating move, initially towards the 1.1655 area en-route to 1.1610 and 1.1585 support levels.

On the upside, bulls would be eyeing for a strong follow-through buying interest beyond the 1.1800 handle, above which the pair is likely to dart back towards one-month highs resistance near the 1.1860 level before eventually aiming to reclaim the 1.1900 handle.