EUR/USD: Pullback completed

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While the shutdown deprives currency traders of valuable benchmarks on employment and American prices in particular, the Euro/Dollar currency pair is completing a pullback phase (graphic rejection) against a conjunction of two remarkable moving averages. Forex traders took note of the lowering of the French debt rating by the Standard & Poor’s agency of the French sovereign rating, from AA- to A+.

For the moment, the American budgetary paralysis is causing little turmoil on the bond markets, and tensions on the 10-year bond have quickly faded. THE Treasuries maturing in 10 years, landing gently on 4%.

“In 2019, during his first term, the administration remained closed for 35 days, which remains the record to this day. At the time, the Council of Economic Advisers attached to the White House estimated that a week of shutdown cost 0.2 points of annual GDP, or billions. Compared to one month, this figure climbed to billions,” recontextualizes Grégoire KOUNOWSKI, Investment Advisor at Norman K.

“In reality, by being aggressive, the American president also seems to indicate his desire to put an end to this budgetary impasse. The extension of the shutdown would be likely to taint the incredible dynamism which persists on Wall Street and which the tenant of the White House is calling for.”

Forex traders are impatient to know the various statistics published by federal organizations since the end of September. The NFP report on employment, or even consumer prices, two pillars for the Fed’s reflection in the construction of its monetary policy, are particularly eagerly awaited.

On this side of the Atlantic, the trajectory of French public finances remains a source of concern. On Wednesday, Goldman Sachs indicated that it was counting on a deficit of 5.3% of GDP for 2026, while Prime Minister Sébastien Lecornu declared this week that the rate should not exceed 5% in the 2026 finance bill, once the parliamentary debate is completed.

“We still anticipate little progress in reducing the public deficit (…) In any case, deep political disagreements, slowing growth and higher borrowing costs risk preventing any significant progress,” the bank said.

Remember that on Thursday, the Lecornu 2 government escaped two motions of censure, including that filed by LFI. The ax has gone to 18 votes.

Note that Ms. Lagarde, President of the ECB, will give a speech at a climate conference at the Bank of Norway in Oslo tomorrow.

At midday on the foreign exchange market, the Euro was trading against $1.1660 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 at a significant angle the trajectory of its 50-day counterpart (in orange).

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 1.1654 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 1.1836 USD.

The expected profitability of this Forex strategy is 641 pips and the risk of loss is 182 pips.

DAILY DATA CHART