EUR/USD: the euro suffers from the tension of the trades on France

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The surprise resignation of the very ephemeral French Prime Minister plunges the second economic power of the euro zone in a form of increasing political instability. Bovers see it for their part an inability to understand between the main parliamentary groups to agree on a budget. Result this morning at the opening in Paris, very strong corrections on the actions of large banks (around -5%).

This shock wave revives the spectrum of a political blocking with the absence of measures necessary to clean up the trajectory of tricolor public finances. “The resignation of Lecornu plunges the political scene into uncertainty. Investors fear a domino effect on economic and budgetary policy”, analyzes Antoine Andreani, head of research actions at XTB France.

This explains clear tensions on French debt. The gap between the yield of the French sovereign obligation at 10 years and that of the same maturity on the German obligation at 10 years (the famous “Spread”), thermometer of market stress on the French signature, is part of 87 base points, i.e. 0.87 percentage point, an unprecedented level since January.

In a few minutes in the wake of the announcement of this resignation, the spot Eurusd lost almost 70 pips.

So far the spot, a risk barometer for risk, showed resistance in the hope of seeing the Fed accelerate its monetary easing process.

Prospects themselves supported by figures confirming the deterioration of American employment health. In particular, the investigation of the Private Adp, which showed a clear destruction of the number of positions in September. Note that investors have been deprived of the publication of the NFP report (Non farm payrolls) Friday, due to the Shutdown. The United States has indeed entered the period of public services paralysis, for lack of agreement in the Senate on the budget.

In the statistical chapter, the operators took note on Friday of the publication of the PMI indices in the euro zone. In September, the composite index, an overall measure of private sector activity, established 51.2 in final data, a higher 16 months. An index greater than 50 indicates an expansion of the activity. No major statistics are on the agenda today.

At midday on the foreign exchange market, the euro was treated against $ 1,1660 approximately.

Key graphics elements

The breakdown of the slaughtered oblique right drawn in black does not put, at this stage in any case, in doubt the power of the upward primary trend, but brings its batch of questioning on the need for consolidation of the pair of currencies. We again issue a neutral opinion on the Eurusd spot, wisely positioned in the heart of the Bollinger bands (20; 2.5).

Medium term

In view of the key graphic factors that we have mentioned, our opinion is neutral in the medium term on Euro dollar parity (Eurusd).

We will keep this neutral opinion as long as the EURO Dollar (EURUSD) prices are positioned between the USD 1,1608 support and the resistance to 1,1835 USD.

Daily data graphics