EUR/USD: Watching out for French vote – OCBC

Euro (EUR) saw a modest rebound overnight, following the larger pullback seen the session before. EUR/USD was last at 1.1655, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Political noises may have short term bearish implication on EUR

"Apart from the moves in US Dollar (USD), the focus is squarely on French politics in the near term. Prediction market is looking for 97% chance that the confidence vote on 8 Sep fails and PM Bayrou will be out as French PM by 31 December."

"Recall last year, a no-confidence vote gamble (although not on budget) saw the exit of former PM Barnier. The risk of a French government fallout and without a leader for weeks or even months should not be ruled out. To add, Dutch holds General Elections on 29 October."

"These political noises may have short term bearish implication on EUR. Nevertheless, broader fundamentals should still support EUR, on a buy on dips. Daily momentum and RSI indicators are showing a clear bias. 2-way trades still likely. Resistance here at 1.1655/65 levels (21, 50 DMAs), 1.1750, 1.1830 levels (2025 high). Support at 1.1620, 1.1570 (23.6% fibo retracement of Mar low to Jul high)."