EUR/USD: Political risks may still weigh – OCBC

Euro (EUR) managed a rebound overnight after Dutch caretaker PM Dick Schoof and his cabinet survived a no-confidence vote yesterday. EUR was last at 1.1650 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

2-way trades still likely

"Nevertheless, focus shifts to General elections on 29 October for Netherlands. Elsewhere in France, PM Bayrou said he would call for a confidence vote on budget (not government) on 8 September. The budget risk was supposed to come later in October but PM’s call to vote on 8 September means the national assembly has to make an earlier return from their 2-months recess (which was supposed to run till 22 September)."

"Last year, a no-confidence vote gamble (although not on budget) saw the exit of former PM Barnier. Political risks in France and Netherlands deserve monitoring as they may have short term implication on EUR but broader fundamentals should still support EUR, on a buy on dips."

"Daily momentum and RSI indicators are not showing a clear bias. 2-way trades still likely. Resistance at 1.1730, 1.18 levels. Support at 1.1610/50 levels (21, 50 DMAs) and 1.1570 levels."