Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1500.
- Add a stop-loss at 1.1750.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1500.
- Add a stop-loss at 1.1750.
The EUR/USD exchange rate pulled back to its lowest level since September 8 as traders focused on the developments in France, where Emmanuel Macron’s efforts to prevent a political crisis failed. It was trading at 1.1657 on Wednesday, down from the year-to-date high of 1.1920.
France Political Crisis
The EUR/USD pair has pulled back this week after Sebastien Lecornu resigned as the country’s prime minister. Efforts by Macron to prevent a deeper crisis have failed, with him giving Lecornu until Wednesday evening to bring opposing parties to give the country stability.
The main risk of the ongoing political crisis is that it will put the budget forming a budget at risk. Also, there is a risk that the new budget will not have the necessary fixes that will prevent a financial crisis in the future.
The ongoing crisis means that there is a possibility that Macron may resign before his term ends in 2027. A resignation will likely give the far right the best chance of leading the country.
The EUR/USD exchange rate also reacted to the muted statements by key Fed officials like Neel Kashkari, Michele Bownan, and Raphael Bostic. No one mentioned the ongoing government shutdown and its impact on monetary policy.
The next key catalyst for the pair will be the upcoming speech by Christine Lagarde, the European Central Bank (ECB) chief. The other notable catalyst will be the Federal Reserve minutes, which will provide more detail about the last meeting and what to expect.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair has pulled back in the past few days. It has moved from the year-to-date high of 1.1920 to the current 1.1655.
The pair has dropped below the 50-day Exponential Moving Average (EMA). It also dropped below the lower side of the ascending channel or rising wedge, while the Relative Strength Index (RSI) has moved below the neutral point at 50.
Therefore, the pair will likely continue falling as sellers target the next key support at 1.1500. A move above the resistance at 1.1750 will invalidate the bearish view.
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