The EURUSD has fallen under heavy selling pressure throughout trading this week, declining to levels not seen since the second trading week of 2017 just below 1.05. The catalyst for the sudden rush of downside momentum has been linked to fresh concerns from investors that Marine Le Pen might pull off a shock French election victory in a couple of months.

If it wasn’t for the impending political risks that Europe is facing with upcoming elections throughout the continent I would personally add my opinion that I think the EURUSD is oversold at these levels.

While the EU economy is improving, political risk is dominating the markets and the threat of a further move towards the anti-establishment in politics is something that investors are clearly not willing to ignore after being caught by surprise results in both the United Kingdom and the United States within the past year.

With the EURUSD falling below 1.05, the question is once again going to be asked as to whether we are destined for parity? Traders should be very mindful before pricing or expecting parity to be next for the EURUSD because we have seen time and time again that there is potential for the pair to reverse higher from these levels.

Technically, the EURUSD does need to conclude trading for the month below 1.05 to be encouraged that there is potential for further selling. This has been what we have monitored since our Q1 outlook (chart below) and I am personally not going to jump on the train expecting parity quite yet.

Another factor to take into consideration is the outspoken comments from the Trump Administration that the Euro is undervalued, and I would not be surprised if these claims are repeated as the new President of the United States desires a weaker USD and hence a stronger Euro would help achieve this.