The EUR/USD pair turned lower on Monday, falling below the 1.1600 level to trade around 1.1590 during the early European session. A mix of political uncertainty in France and concerns over a possible escalation in the US-China trade dispute has put pressure on the Euro and weighed on risk sentiment globally.
Key Drivers:
- French Cabinet Struggles to Reassure Markets:
European investors remain cautious following the reappointment of Sébastien Lecornu as Prime Minister by President Emmanuel Macron. Despite naming close ally Roland Lescure as Finance Minister, doubts persist over the cabinet’s ability to push through tough fiscal reforms, including a belt-tightening budget. - US-China Trade Tensions Resurface:
On Friday, US President Donald Trump threatened to impose 100% tariffs on all Chinese imports starting November 1, following China’s restrictions on rare earth exports. While Trump appeared to soften his stance with a Sunday post on Truth Social—“Don’t worry about China, it will all be fine!”—market fears over a renewed trade war continue to linger. - China’s Firm Response:
Beijing defended its export restrictions, stating they were agreed upon during talks in Madrid and emphasized its readiness to retaliate if the US proceeds with additional tariffs. - US Markets Closed for Columbus Day:
With lower trading volumes expected due to the US holiday, market movements may remain limited, though eyes will be on the G20 finance ministers meeting and ECB President Christine Lagarde’s remarks at the IMF/World Bank annual meetings in Washington.
Market Reaction:
The US Dollar had weakened on Friday after Trump’s tariff threats, allowing EUR/USD to recover temporarily. However, the pair has since lost momentum, with fresh political doubts in Europe dragging the Euro back down.
US data on Friday showed the Michigan Consumer Sentiment Index at 55.0 for October, slightly below September’s 55.1 but better than the expected 54.2. The Greenback found some support from the release.
Technical Outlook: EUR/USD Under Pressure Below 1.1600
- The pair has failed to hold above 1.1600, signaling renewed bearish momentum.
- RSI on the 4-hour chart remains below 50, and MACD is turning lower, indicating fading bullish momentum from Friday’s bounce.
- A sustained break below 1.1590 could expose the next support levels at 1.1545–1.1525.
- On the upside, initial resistance lies at 1.1630, followed by 1.1690 and the key barrier around 1.1720–1.1730, where price was capped earlier this month.
In Summary:
The Euro is struggling amid political uncertainty in France and renewed trade tensions between the US and China. While Trump’s softer comments may have eased immediate fears, markets remain on edge. With key central bank meetings ahead and reduced US trading activity today, volatility could stay subdued in the short term—but risks remain tilted to the downside for EUR/USD.
