The EUR/USD pair traded near 1.1620 in early European hours on Monday, holding its ground above the key 1.1600 support level despite growing uncertainty in France’s political landscape. The Euro (EUR) came under mild pressure against the U.S. Dollar (USD) after reports of potential government instability in Paris reignited investor caution across the Eurozone.
Political tensions deepened as Socialist Party leader Olivier Faure threatened to bring down Prime Minister Sébastien Lecornu’s government if the administration fails to meet tax reform demands. Faure indicated he would file a no-confidence motion unless the government raises taxes on billionaires, a move that could destabilize the already fragile coalition.
These developments have sparked renewed debate over France’s fiscal outlook, with investors watching closely for signs of wider European political spillover.
Euro Maintains Bullish Bias Above 100-Day EMA
From a technical standpoint, EUR/USD retains a mildly bullish structure as long as it trades above the 100-day Exponential Moving Average (EMA), currently near 1.1575. This level has repeatedly acted as a dynamic support line, keeping the broader recovery trend intact.
However, momentum indicators suggest the bullish momentum may be fading. The 14-day Relative Strength Index (RSI) hovers around 45.7, slightly below the mid-point, hinting that buyers are losing strength and that short-term corrections cannot be ruled out.
If the pair continues to hold above the 1.1600 zone, traders may expect renewed buying pressure. The next resistance sits at 1.1694, marking the October 16 swing high. A clear break above this barrier could trigger a move toward 1.1755, aligning with the upper band of the Bollinger Channel. Further upside may expose 1.1820, the high recorded on September 23.
Downside Risks Remain If 1.1575 Support Fails
On the downside, 1.1575 remains a crucial technical floor. A decisive break below this level could signal a shift in sentiment and attract bearish momentum, opening the way for a decline toward 1.1545 and then 1.1403, the low from July 31.
Traders should also note that continued weakness in European data or escalating political conflict in France could accelerate selling pressure, especially if U.S. Treasury yields remain elevated and strengthen the dollar’s appeal.
Outlook: Political Uncertainty Meets Technical Caution
While France’s political headlines have sparked volatility, the broader Euro outlook remains cautiously optimistic. The currency continues to find buyers at lower levels, suggesting that long-term sentiment toward the Eurozone economy is still resilient.
Nevertheless, near-term risks persist. A failure by French lawmakers to reach a budget agreement could weigh on the Euro, especially if investor confidence falters. In contrast, a resolution to the crisis or dovish commentary from the U.S. Federal Reserve could support a rebound toward the 1.1700–1.1750 area in the coming sessions.
