The euro currency was seen giving up the gains last week as the common currency failed to hold on to the gains.

There were a number of factors including the equity market sell-off which sent the U.S. dollar higher.

Domestically, the fact that Angela Merkel’s party struck a deal with the SPD party wasn’t taken in stride. According to political analysts, the alliance is expected to have come at a cost of Merkel having to give away huge concessions.

On the economic front, data from the Eurozone continued to show positive.

Data released last week showed that the European Commission expects growth in the Eurozone to continue at a steady pace.

Despite upgrading its GDP forecasts, the consumer prices in the Eurozone are expected to remain weak until 2019.

Still, the upbeat momentum in growth was seen as the ECB likely to end its QE program this year in September.

Technical Analysis on EURUSD

From a technical perspective, the euro has remained well supported but the rally looks to be outstretched.

As a result the correction in the EURUSD has been expected.

Last week, the common currency declined, falling below the major support level of 1.2297 – 1.2231 level.

This suggests that the declines could extend towards the next major support at 1.2056.

This will mark the first test of support and prices could potentially rebound off this level. Further declines could eventually send the EURUSD lower towards 1.1241 eventually.

However, we expect to see a near term retracement to the declines.

This could make for a potential selling opportunity in the EURUSD. Any gains could likely be limited to the current resistance zone noted earlier.