Insights 
VT 
The EUR/USD pair has continued its decline, falling below 1.1600 to its lowest level since late August. The Euro faces pressure due to political turmoil in France after PM Lecornu’s sudden resignation, affecting sentiment negatively.
The Euro is broadly under pressure from the stronger US Dollar, declining to around 1.1585 in the American session and showing a 1.30% decrease this week. The US Dollar Index has reached a two-month high near 99.20 as traders prefer USD amid uncertainty.
Technical Analysis Of EUR/USD
Technically, EUR/USD has been bearish since its peak at 1.1918 on 17th September, showing lower highs and lows. The pair’s position below the 21, 50, and 100-day SMAs supports the downward trend, with the RSI indicating ongoing selling without yet entering oversold territory.
Key support is seen in the 1.1580-1.1560 region, with a close below this potentially leading to further declines towards August lows. Resistance is identified around 1.1648. A break above could lead to recovery efforts, yet bulls need to achieve beyond the 1.1700 mark for any substantial rebound.
Today’s Euro performance shows its strongest gains against the New Zealand Dollar despite overall weakness. The Euro experienced notable declines against several major currencies including the US Dollar.
Impact Of Political Turmoil In France
The political turmoil in France is the central reason for the Euro’s weakness, and we should treat this as more than just a one-day event. The resignation of a prime minister in a key Eurozone economy introduces significant uncertainty, which is weighing on the common currency. We’ve seen the spread between French and German 10-year government bonds widen by over 15 basis points this week, showing that investors are actively demanding a higher premium to hold French debt.
This situation is compounded by a strengthening US Dollar, which isn’t just a reaction to European weakness. Recent data shows the US economy remains robust, with the last preliminary estimate for Q3 GDP coming in at a surprising 2.8%, well above expectations. This strong performance makes any Federal Reserve interest rate cuts less likely in the near term, giving the Dollar a fundamental advantage.
For derivative traders, this environment suggests a bearish stance on the EUR/USD pair. Buying put options with strike prices below the current support, perhaps around 1.1500, offers a way to profit from further declines while capping potential losses. Implied volatility in the currency pair has jumped to a three-month high, reflecting the market’s anxiety and making options a relevant tool for managing this uncertainty.
The technical setup supports a continued slide, as the pair is trading below all key simple moving averages. We should watch the 1.1560 level closely as a critical support zone. A confirmed break below this area in the coming days would likely trigger a new wave of selling, targeting the August lows near 1.1527 and potentially even 1.1391.
This situation feels similar to periods of political stress we saw in the Eurozone back in the early 2010s, where headlines from a single member state could dictate the Euro’s direction for weeks. Back then, uncertainty over fiscal stability in countries like Greece or Italy led to sustained Euro weakness. The current French instability could have a similar, prolonged impact on market sentiment.
Looking ahead, we must monitor statements from both the European Central Bank and French political leaders for any signs of stabilization. Any dovish tilt from the ECB in response to this political risk would be another bearish signal for the Euro. Conversely, any surprisingly strong Eurozone inflation data could complicate the picture, but for now, the path of least resistance for EUR/USD is downward.
