The EUR/USD currency pair has experienced significant volatility, currently trading at 1.1690. This movement follows a surge in the US Dollar, prompted by political instability in Europe and Asia. During the latest local elections in Japan, the Liberal Democratic Party saw a leadership shift with Sanae Takaichi positioned to become the country’s first female Prime Minister. This anticipated leadership change has resulted in speculation regarding a relaxation of monetary policy and increased government spending, causing the Japanese Yen to fall sharply, which subsequently strengthened the US Dollar against it.
In Europe, political turmoil resonates as the newly appointed French Prime Minister, Sébastien Lecornu, resigned less than 24 hours after his cabinet was introduced. This marks the fifth resignation of a French Prime Minister amid ongoing challenges in passing a budget to tackle the country’s significant debt, now exceeding €3 trillion, approximately 114% of France’s Gross Domestic Product. The resignation created substantial selling pressure on the Euro, further enhancing demand for the safer US Dollar.
Meanwhile, ongoing political tensions in the United States, stemming from a government shutdown, continue to weigh on market sentiment. Disagreements between Democrats and Republicans remain unresolved, with accusations of impending federal layoffs adding to the uncertainty. Economic data from the European Union provided little reassurance, with the October Sentix Investor Confidence index showing only a modest improvement and retail sales for August indicating a slight increase after a previous decline.
Attention now turns to Christine Lagarde, the President of the European Central Bank, who is set to address the Committee on Economic and Monetary Affairs of the European Parliament later in the day. Her insights on future monetary policy are likely to influence the EUR, especially given the current bearish stance on the Euro amid recent developments.
From a technical perspective, the EUR/USD pair currently finds itself at the lower end of its recent range, having dropped to its lowest point in over a week at 1.1651. Short-term indicators point to further downside risks, with the daily chart suggesting resistance around 1.1740, where the 20 Simple Moving Average (SMA) hovers. Support levels are noted at 1.1650, 1.1620, and 1.1590, while resistance can be found at 1.1710, 1.1745, and 1.1780. The 4-hour chart confirms a downtrend, with all major moving averages lining up in a bearish formation. Although sellers have eased somewhat, the threat of additional declines remains, particularly if the pair moves below the recent intraday low.
