EUR/USD: French politics does not cause the Euro to sway

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Currency traders naturally remain attentive to the political situation in France, the second economic power in the Euro Zone, which could see a 4th prime minister in 2024, after the vote, by 331 left-wing and National Rally deputies, of a motion of censure, bringing down the Barnier government. “While we must remain attentive to the borrowing rate spreads between France and its neighbors, the current political situation would not, a priori, be likely to create the conditions for a financial crisis in France,” judge Grégoire Kounowski, “Investment advisor” at Norman K.

The CAC 40, as such, shows little sign of excitement this week, although its underlying bias remains fragile. Currency traders keep a close eye on rate differences, the famous “spreads”, particularly between the 10-year French OAT and the German Bund of the same maturity. “On the sovereign spread side, a paradigm shift is emerging, with an improvement in credit quality in peripheral countries, while uncertainties persist in France and Germany,” for Alexandre Caminade, director of core rates and liquid alternatives management at Ostrum AM.

“In addition to political uncertainty, these two countries will see the amount of their net emissions increase due to the acceleration of the reduction of the ECB’s balance sheet with the cessation of reinvestments from the Pandemic Emergency Purchase Program (PEPP). spread between France and Germany should evolve between 80/90 bp with a risk of a negative outlook or even deterioration by the rating agencies.”

To follow at 2:30 p.m. weekly registrations for unemployment benefits, expected to remain as close to the floor of 200,000 new units. Enough to further gauge, after the solid ADP survey published Wednesday, the flourishing health of American employment, before the “verdict” tomorrow, namely the publication of the federal NFP (Non Farm Payrolls) report for the month of November.

At midday on the foreign exchange market, the Euro was trading against $1.0530 approximately.

KEY GRAPHIC ELEMENTS

The currency pair has just come out from the bottom, in intense volatilityof a wedge pattern, which confirms the bearish bias, which is now fundamental. Since then, the fragile supports have broken one after the other. Negative review maintained. However, at this stage the decline and the formation of a technical rebound cannot be long in coming, we are watching for the signs.

In the immediate term, the flagship currency pair completes a pullback (graphic rejection) of school on $1.0550.

MEDIUM TERM FORECAST

Considering the key graphical factors that we have mentioned, our opinion is negative in the medium term on the Euro Dollar (EURUSD).

Our entry point is at 1.0536 USD. The price target for our bearish scenario is at 1.0101 USD. To preserve the invested capital, we advise you to position a protective stop at 1.0701 USD.

The expected profitability of this Forex strategy is 435 pips and the risk of loss is 165 pips.

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