Political crisis in France temporarily drags down EURUSD

The EURUSD pair is in a downtrend, hovering near 1.16150 during Wednesday's morning session, which is below its opening level. This euro weakness stems from a severe political crisis in France. With the Prime Minister stepping down and a stable government proving elusive, confidence in the fiscal health of the eurozone's largest economy is waning, prompting capital to flee the country and its currency to depreciate.

Nevertheless, this negative sentiment is likely to be temporary and has been partially factored into current pricing. The European Central Bank's (ECB) firm stance provides substantial backing for the euro. The regulator has signaled that it views its rate-cutting cycle as complete and has no plans to ease monetary policy further, assessing inflation risks as balanced. This certainty acts as a stabilizing force, preventing the pair from falling any lower.

Meanwhile, a weaker US dollar is in the offing. The Federal Reserve (Fed) is almost certain to continue its rate lowering, with two additional reductions anticipated before year-end. This trend is driven by both renewed pressure from the administration and emerging signals of a cooling labor market. A clear policy divergence is taking shape: the ECB is holding rates steady, while the Fed is moving toward further easing, thereby laying the groundwork for a more robust euro in the medium term.

From a technical perspective, the EURUSD pair shows a bearish outlook, having declined since its September peak. The Chaikin Oscillator (3, 10, Exponential) remains in negative territory, pointing to consistent capital outflows since mid-September and supporting this downtrend. However, Stochastic Indicator (5, 3, 3) readings of 48 and 50 suggest the slump seen now may be short-lived, as there are no signs of accelerated declines. The nearest support is 1.15640, a level previously tested in August. A rebound originating from this zone might prompt a revisit to 1.17100, and a successful break above that could eye 1.17700.

Consider the trading plan down below:

Buy EURUSD at the current price, particularly when the market is declining or approaching 1.15640. Take profit 1: 1.17100. Take profit 2: 1.17700. Stop loss: 1.15000.

The forecast is valid from October 8 to October 15, 2025.