The Euro (EUR) edged higher on Monday, with EUR/USD rebounding modestly above 1.1670 ahead of the US trading session after plunging earlier in the day. The pair remains well below the 1.1730 intraday highs seen during Asian hours, pressured by renewed political turmoil in France and a broadly firmer US Dollar (USD).
France’s political crisis shakes market confidence
The unexpected resignation of French Prime Minister Sébastien Lecornu—announced just hours after unveiling his new government—has reignited political uncertainty in the Eurozone’s second-largest economy. Lecornu’s departure, the fifth prime ministerial change under President Emmanuel Macron’s second term, has deepened concerns over the stability of the French government and raised speculation about possible snap elections.
Market participants fear that fresh elections could strengthen populist factions and increase fiscal volatility, further weighing on the Euro. “The situation calls into question President Macron’s political credibility,” analysts noted, as investors react by trimming exposure to Euro-denominated assets.
US shutdown drags on, safe-haven USD remains supported
Across the Atlantic, the United States (US) government shutdown has entered its second week after the Senate failed to pass a funding bill over the weekend. President Donald Trump has warned of potential mass layoffs of federal workers if negotiations remain deadlocked, stoking fears of prolonged fiscal disruption.
Despite the political gridlock, the US Dollar has held firm as safe-haven demand persists. The election of pro-stimulus candidate Sanae Takaichi as Japan’s next prime minister added further support to the Greenback, as markets interpreted her policy stance as dovish for the Japanese Yen (JPY).
Data highlights: Eurozone retail sales meet expectations
Eurozone retail sales rose 0.1% month-on-month in September, matching market expectations and improving slightly from the 0.4% contraction seen in July. On an annual basis, sales were up 1% from August 2024.
Attention now turns to remarks from European Central Bank (ECB) President Christine Lagarde, who is set to speak in Strasbourg later in the day. In the US session, comments from Kansas City Fed President Jeffrey Schmid will be closely watched for policy cues.
Fed policymakers remain divided on the rate outlook. While Fed board nominee Stephen Miran suggested inflation is “well-anchored” and that there is “plenty of space to cut rates,” Dallas Fed President Lorie Logan warned that price pressures could worsen in the near term. Nonetheless, market pricing continues to favor additional easing, with the CME FedWatch Tool showing a 95.7% probability of a 25-basis-point (bps) rate cut in October and an 84% chance of another cut in December.
Technical analysis: bears target 1.1645 support
EUR/USD remains under pressure, hovering near the 1.1645 support zone after a 0.6% daily decline. The 4-hour chart shows the Relative Strength Index (RSI) falling sharply, signaling strong bearish momentum, while the Moving Average Convergence Divergence (MACD) indicator has crossed below the signal line—reinforcing the downside bias.
A decisive break below 1.1645 could expose the September 2–3 lows near 1.1610, followed by the August 22–27 lows around 1.1575. On the upside, immediate resistance is seen at 1.1685, followed by 1.1730 (session high) and the 1.1760–1.1770 zone representing last week’s peaks.
