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On the Euro/Dollar, the 20-day moving average (in dark blue) crossed the decline of its 50-day counterpart (in orange), while this weekend, the Standard & Poor’s agency lowered its rating on French debt, downgrading it from AA- to A+ with a negative outlook. The verdict was not expected until November 28.
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.
It is in this context that Moody’s will in turn deliver its verdict on France on Friday. “Will the agency simply lower its outlook? Or will it directly lower France’s rating?” asks Alexandre Baradez, head of market analysis at IG France.
“It is worth remembering that at Moody’s, France benefits from the Aa3 rating with a “stable” outlook. In a progressive rhythm of adjustment, a rating agency first lowers the outlook, moving it from “stable” to “negative”, then secondly, decides to downgrade the rating if no improvement in the outlook is noted.”
“But on Friday, Moody’s could well decide to skip the outlook lowering step and go straight to downgrading the rating. Indeed, a rating agency can lower a credit rating without first changing the outlook. S&P, Moody’s or Fitch can lower a rating due to sudden events (such as financial difficulties, policy changes or market shocks) without first adjusting the outlook.
Across the Atlantic for the moment, the American budgetary paralysis is causing little turmoil on the bond marketsand tensions on the 10-year bond 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 clearly 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.
Especially since the next monetary deadlines (FOMC of the Fed and Council of Governors of the ECB) are approaching, on October 28 and 30.
At midday on the foreign exchange market, the Euro was trading against $1.1620 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 1.1614 USD. The price target for our bearish scenario is at 1.1013 USD. To preserve the capital invested, we advise you to position a protective stop at 1.1731 USD.
The expected profitability of this Forex strategy is 601 pips and the risk of loss is 117 pips.
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