The Euro (EUR) gained traction amid fluctuations in the French political climate and escalating US-China tensions impacting the US Dollar (USD). Currently, the EUR stands at 1.1570, with FX analysts observing its position closely.

French politics added complexity with the reappointment of Lecornu as Prime Minister after a brief resignation, alongside a cabinet reshuffle. This political scenario creates uncertainty, as the new team must navigate budget compromises to avoid no-confidence votes. Moreover, upcoming Dutch elections could apply further pressure on the Euro in the short term. Nevertheless, the fundamental outlook for the Euro remains positive, encouraging a cautious buy-on-dips strategy.

Technical aspects show persistent bearish momentum on the daily chart, with the Relative Strength Index hinting at a potential rebound from oversold territories. Resistance levels are identified at 1.1640 and 1.1690, while support is noted at 1.1550 and 1.1460. Analysts foresee the EUR/USD trading within a 1.1550 to 1.1680 range in the immediate future. The FXStreet Insights Team offers carefully selected market observations, combining insights from various analysts to provide a comprehensive analysis.

We are seeing the Euro find bids around the 1.1570 level, primarily because a flare-up in US-China trade relations last week weakened the dollar. The US Commerce Department’s new restrictions on technology exports saw the dollar index (DXY) fall 0.5% from its October high. This external pressure on the dollar is providing a temporary floor for the EUR/USD pair.

However, political uncertainty within Europe is capping any significant gains for now. While the French prime minister was reappointed last Friday, the government remains fragile and the upcoming Dutch general election on October 29 is a major risk event. Recent polling shows a narrowing gap between establishment and populist parties, which is keeping traders cautious and likely to weigh on the Euro in the coming two weeks.

Despite these political headwinds, the broader fundamental picture supports a buy-on-dips approach. The Eurozone’s flash manufacturing PMI for September, released last week, came in at 50.8, signaling modest economic expansion. This resilience suggests that any politically driven dips towards the 1.1550 or 1.1460 support levels could be viewed as opportunities.

For derivative traders, this environment points towards strategies that benefit from a wide but contained range. With implied volatility rising ahead of the Dutch election, selling options strangles with strike prices outside the expected 1.1550-1.1680 range could be advantageous. This strategy profits if the pair remains within these bounds after the political risk subsides post-election.

We saw a similar pattern in the summer of 2024, when political jitters in a member state caused a temporary dip in the EUR/USD before economic fundamentals reasserted themselves. That historical context supports the view that patience is required. Using the strong support near 1.1460 as a guidepost for positioning can help navigate the expected short-term turbulence.