Key Points
- Euro trades at 1.1642, flat on the day after touching 1.1573.
- French PM Bayrou faces a confidence vote, widening spreads with German bunds.
The euro remained under pressure on Thursday as French political instability unsettled investors, though analysts suggest losses could be contained in the near term.
Prime Minister Francois Bayrou faces the prospect of being ousted next month after calling a surprise vote of confidence on his deficit-reduction plans.
The move has widened spreads between French and German government bonds, adding to political risk premium in the single currency.
The euro briefly touched 1.1573, its lowest in three weeks, before stabilising around 1.1642. Broader dollar positioning remains the key driver, with markets focused on U.S. economic data and next month’s Federal Reserve meeting.
Technical Analysis
EUR/USD has been in a broad uptrend since February’s low at 1.0210, climbing steadily to a July peak near 1.1830 before easing into consolidation.
At present, the pair trades around 1.1641, holding above the 1.1500 support area. Moving averages (5, 10, 30) remain aligned in a generally supportive structure, though they have flattened out, suggesting momentum has cooled.
The MACD is hovering close to the zero line, reflecting the lack of clear directional strength.
In the near term, resistance sits around 1.1700–1.1830, which must be cleared for the uptrend to resume. On the downside, a break below 1.1500 would weaken the structure and expose 1.1350 as the next support.
For now, the euro appears to be range-bound, with traders watching for US economic data and ECB policy cues to drive the next decisive move.
Cautious Forecast
If French political risks intensify and the dollar remains firm, EUR/USD could retest 1.1600 or slip toward 1.1500. However, stabilisation in bond spreads and a softer U.S. data print could help the euro rebound toward 1.1750.
