EUR/USD backslides as risk-off flows bolster Greenback heading into Friday

• EUR/USD erases recent gains to fall back into technical weak zone.
• Euro under pressure as political turmoil shakes markets.
• Greenback bolstered by risk-off flows as US data misses the mark.

EUR/USD tumbled back into recent lows below 1.0750 on Thursday, paring away recent gains as confidence in the Euro (EUR) flounders on the back of EU political instability. A miss in US Producer Price Index (PPI) figures is steepening concerns of an economic slowdown in the US, sparking a hard curve in risk appetite heading into the week’s final trading sessions.

European parliamentary elections drove confidence in the Euro even lower as France dissolves parliament and heads into snap elections. French President Emmanuel Macron called for a short-notice presidential election after suffering a crushing defeat in EU parliament elections, and financial markets are tilting to the downside at the prospect of France’s President Macron getting replaced by the National Rally’s Marine Le Pen, a right-leaning conservative politician sweeping to popularity within France on a platform of steep tax cuts, lowering the retirement age, and stiff limits to immigration into France from both outside and within the EU.

Financial markets in Europe are increasingly uneasy about a Le Pen win in France, which would carry steep fiscal burdens at a time when European economic figures are broadly missing the mark but rate cuts from the European Central Bank (ECB) remain difficult to deliver with lopsided inflation still plaguing the Eurozone.

US Dollar flows spiked higher on Thursday after US PPI figures eased quicker than forecasts,  and US Initial Jobless Claims flagged a faster-than-expected uptick in new unemployment claims. Markets are now pivoting to Friday’s University of Michigan Consumer Sentiment Index for June, which is forecast to rise to 72.0 from 69.1.

A smattering of talking points from several ECB policymakers are expected throughout Friday as finance ministers from across the European Union meet to kick off the next round of Eurogroup Meetings.

EUR/USD technical outlook

Thursday’s decline has sent EUR/USD back into recent lows as the pair struggles to hold onto chart territory north of 1.0750. Fiber bids were unable to dig in a foothold above the 200-hour Exponential Moving Average (EMA) at 1.0804 this week, and the pair heads into Friday’s trading sessions on the back foot.

EUR/USD has buckled underneath the weight of descending trendlines drawn from 2024’s peak bids near 1.1140. Downside pressure has been building since the pair declined from June’s early highs above 1.0900, and the Fiber is now trading back into the low side of the 200-day EMA at 1.0804.

EUR/USD hourly chart

EUR/USD daily chart