EUR/USD: the single currency loses feathers

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The contraction of the risk appetite resulted in the foreign exchange market by a confirmation of the short -term drop in the euro / dollar. This rebalancing of forces is to be linked with chronic political instability which affects the second economic power of the euro zone, instability reinforced by the surprise resignation, Monday, of Sébastien Lecornu.

This political impasse above all prevents France from having a budget for 2026 and thus correcting the trajectory of its public finances. Goldman Sachs expects a deficit at 5.5% of GDP for this year (against 5.4% for the government) but especially on 5.3% of GDP for 2026, much more than the 4.7% referred to by the resigning Prime Minister Sébastien Lecornu.

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. Which set out the French 10 years once above his Italian counterpart.

“How to restore confidence in a context of weakened governance?” Asks Fidel Martin, president of Exoé. “Companies, investors and citizens need clear benchmarks and visibility on future economic guidelines. France, with its industrial fabric and its attractiveness on the markets, cannot afford to let uncertainty slow growth and investment.”

Mr. Martin remains “convinced that political stability is an essential lever for the harmonious functioning of financial markets. Investors do not only bet on economic results: they bet on the predictability and consistency of government decisions. Each prolonged ministerial vacancy, each surprise reshuffle, acts as a brake on appetite for risk and confidence in the French economy.”

To be continued at 8:00 p.m. on the Fed minutes, namely the chronological report of the debates that hosted the last monetary policy committee.

At midday on the foreign exchange market, the euro was treated against $ 1,1615 approximately.

Key graphics elements

The bullish oblique which prevailed so far (in black on the graph) is now broken, with confirmation sweater. The negative opinion is proposed under this oblique, while the relative force index collapses.

Medium term

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

Our entry point is 1,1615 USD. The lens of our lowering scenario is 1,1013 USD. To preserve the committed capital, we advise you to position a protection stop at 1,1786 USD.

The profitability hope of this Forex strategy is 602 pips and the risk of loss is 171 pips.

Daily data graphics