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Macron wins, but euro slides

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The euro has started the week with sharp losses as it struggles to stay above the 1.07 line. In the North American session, EUR/USD is trading at 1.0717, down 0.73% on the day.

Euro woes continue

On Sunday, President Emmanuel Macron won a decisive victory over Marie Le Pen of the extreme right, by a score of 58% to 42%. The markets reacted with relief rather than elation, given that Le Pen, an avowed euro-sceptic, made a very strong showing. A Macron victory was priced in last week, and the brief euro rally after the election results didn’t last.

It has been a miserable month of April for the euro, which shed over 300 points. The currency has been under pressure from the Ukraine war next door, in particular the sanctions against Russia which are having an effect on growth in Western European countries. There are growing calls in Europe to ban energy imports from Russia, which would have a massive effect on the Russian economy. However, Germany and other countries are unwilling to make such a move because of their dependence on Russian energy. Germany, for example, gets 25% of its oil and 40% of its natural gas from Russia, and abruptly cutting off these supplies would send the country into a recession. With all the uncertainty surrounding the war and sanctions, the euro is having a tough time finding its footing.

German data started the week on a positive note, although it wasn’t enough the help the bleeding euro. German Ifo Business Climate rose to 91.8, up from 90.8 and above the consensus of 88.3 points. German Business Expectations climbed to 91.8 (90.8 prior), above the forecast of 89.1.

Meanwhile, Federal Reserve hawkishness is also weighing on the euro. The Fed is in a hurry to roll out further rate hikes in order to contain inflation, and Fed Chair Powell continues to hint at a 0.50% increase in May, with possibly more such increases in the coming months. This widening of the US/Europe rate differential points to the euro continuing to lose ground.

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EUR/USD Technical

  • EUR/USD has broken below 1.0810, a multi-decade trendline. Below, there is support at 1.0728 and 1.0657
  • There is resistance at 1.0832 and 1.0903

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
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