EUR/USD: bears in control, headed for breakout below 50-D SMA?

• EUR/USD: giving way towards Jan 2018 lows.
• EUR/USD: political risks on the horizon.

End of month flows see the EUR/USD below the rising 10-W SMA still and price penetrating the 50-D SMA, making fresh daily lows since Jan 2018 low as the DXY holds on to the safe haven bid while stocks drop away and eyes turn to next months political riks.

Fed's Powell was the latest catalyst for further upside in the greenback, recovering from cliff edge levels earlier in the month around 88.50. The data from the US was largely shrugged off with US GDP Q4 annualised in line while Gross Domestic Product Price Index (Q4) missed by 0.1% to the downside at 2.3 vs 2.4%. There was another slight miss in EZ CPI y/y by -0.1% at 1.0% vs the expectations of 1.1% vs prior 1.0%. 

In European and Japanese headlines, EU's Barnier warned that time running out for Brexit deal while Weidmann said that the ECB could end bond buys this year. Meanwhile, BOJ's Kuroda says policy normalization would be 'very gradual'.

Political risks on the horizon

Sunday's German SPD membership vote unexpectedly rejected a grand coalition with Merkel's conservatives. At the same time, we have the Italian elections coming up in the Eurosceptic Lega being a major risk factor. Should the unexpected happen, and Lega wins more seats than Forza Italia there will be a centre-right coalition. The market is still very unbalanced on the long side when it comes to speculative positions and a political upset could send the euro crashing as positions are squared off, while the cross would plummet as the yen pulls in the safe haven flows.

EUR/USD levels

RSIs are biased to the downside with the price below the daily 10 and 21 SMAs and daily double top while testing the 50-D SMA here. A break of 1.2180 opens the January 18 low at 1.2165 ahead of the 2017-2018 uptrend at 1.2044. To the upside, 1.2330 needs to be broken with positive closes above it for a run to 1.2380 through the 21-D SMA, (1.2351).