EUR/USD: French parliamentary debates can begin

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The Euro traced a pullback (graphic rejection) on the 50-day moving average (in orange), while France seems, by the strength of the handle, to emerge from the budgetary rut. As a reminder, Sébastien Lecornu said he wanted to submit to the Assembly the possibility of suspending the pension reform until the next presidential election. Enough to remove the threat of government censorship, and open the prospect of a budget, certainly less ambitious, for the year 2026. Unless a special law would renew the 2025 budget to the nearest euro, which would inevitably send a very bad signal to the markets.

The Lecornu 2 government faced two motions of censure this morning, one tabled by the RN, the other by LFI. These two motions were successively rejected.

“The debates had to be able to start, and they will start,” Sébastien Lecornu briefly declared.

All is not yet won, but in any case the specter of total paralysis is dissipating.

“Budgetary stabilization constitutes a precondition for any reflection on long-term growth drivers. Finding financial and political room for maneuver would make it possible to reorient the debate towards structural priorities such as competitiveness and reindustrialization, particularly in the face of growing Chinese competition. The markets are not signaling immediate panic, but a slow drift in the French situation,” warns Lucile Bembaron, economist at Antares.

“The Moody’s agency should also confirm this on October 24 by downgrading France’s rating. The urgency of providing a clear budgetary trajectory is real: we must not wait for the markets to send a more brutal signal to react. We must free up budgetary space and time for very important substantive issues for France.”

In terms of statistics yesterday, currency traders took note of the NY Fed’s manufacturing index, which rose sharply to 10.7, well beyond expectations. Last month, the barometer was in negative territory.

A word, finally, on the shutdownthis paralysis of non-essential federal public services due to lack of agreement on the budget in the Senate. Already because it deprives currency traders of valuable benchmarks on the American economy, in particular on prices and employment. And because it can have palpable consequences on the economy, depending on its duration.

“During a shutdownfederal agency closures do not happen all at once. Their consequences are felt gradually as the duration lengthens. A few days go unnoticed, but in a few weeks, millions of federal civil servants and subcontractors find themselves without pay,” recalls Grégoire KOUNOWSKI Investment Advisor at Norman K.

“Most of the 1.9 million federal civil servants are experiencing a salary freeze, which is pushing consumption down. Nearly 750,000 of them are unemployed, with the result that services are closing or no longer functioning properly. In the meantime, the Republican administration wants to lay off thousands of federal civil servants and reduce programs benefiting states led by Democrats. Donald Trump threatens also openly not to pay the salary arrears of the civil servants concerned once the crisis is resolved.”

At midday on the foreign exchange market, the Euro was trading against $1.1650 approximately.

KEY GRAPHIC ELEMENTS

The bullish oblique that prevailed until now (in black on the chart) is now broken, with pullback confirmation. The negative view is offered under this oblique, while the relative strength index collapses. The 20-day moving average (in dark blue) is about to break the trajectory of its 50-day counterpart (in orange) at a significant angle.

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 1.1650 USD. The price target for our bearish scenario is at 1.1013 USD. To preserve the invested capital, we advise you to position a protective stop at 1.1761 USD.

The expected profitability of this Forex strategy is 637 pips and the risk of loss is 111 pips.

DAILY DATA CHART