EUR/USD price slips below $1.167 as French political uncertainty weighs on sentiment

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Euro slips below $1.167 as French political turmoil weighs on sentiment

Highlights

- Euro drops to $1.1658 as French political turmoil undermines market confidence.

- Lecornu’s resignation and fiscal uncertainty raise fears of eurozone instability.

- EUR/USD breaks key support at $1.167, exposing downside toward $1.16 and $1.155.

The development reignited fears about policy gridlock in the euro area’s second-largest economy, a concern that arrives as the European Central Bank (ECB) struggles to balance weak growth with persistent inflation. The growing political risk premium has added pressure on the single currency, which has already been under strain from U.S. dollar strength and uneven eurozone data.

Technical structure points to further weakness

From a technical perspective, the EUR/USD pair has broken decisively below its ascending trendline support that has held since early August. The breach of the $1.167 level confirms a shift in structure, with downside targets emerging near $1.16 and $1.155.

EUR/USD price analysis (Source: TradingView)

The cluster of exponential moving averages between $1.172 and $1.174, covering the 20-, 50-, 100-, and 200-period EMAs, now forms a strong resistance cap. Unless the pair reclaims this zone, the broader bias remains bearish.

Momentum indicators echo this caution. The 4-hour RSI sits near 31.8, reflecting deeply oversold conditions but also highlighting that sellers remain in control. While a short-term rebound cannot be ruled out, a sustained recovery would require a break above $1.174 to neutralize the current downtrend.

Political tension amplifies macro headwinds

France’s government now faces heightened scrutiny as it prepares to present a divisive fiscal plan to parliament. The French deficit remains the largest in the eurozone, leaving limited fiscal flexibility at a time when growth has stagnated. Any further political stalemate could undermine investor confidence and deepen concerns about fiscal coordination across the bloc.

In contrast, the U.S. dollar continues to benefit from a resilient macro backdrop. Stronger-than-expected labor market indicators and safe-haven flows have supported dollar demand, particularly as U.S. economic data holds firm against Europe’s weaker outlook. The divergence in fundamentals continues to drive the widening gap between the two currencies.

Outlook and levels to watch

The near-term outlook for EUR/USD remains bearish as long as the pair trades below the $1.172 to $1.174 resistance zone. A break under $1.1600 would expose further downside toward $1.155 and potentially $1.15, where deeper Fibonacci retracement levels align. Conversely, a recovery above $1.1740 could spark a short-covering rally toward $1.1800, though such a move would require improved sentiment around French politics or stronger eurozone data.

The broader picture shows the euro caught between political fragility in Europe and a steady U.S. dollar backdrop. Traders are likely to stay cautious ahead of France’s fiscal presentation and any ECB commentary addressing the balance between inflation risks and fiscal uncertainty.

In prior analysis, EUR/USD had been holding firm near the $1.175 region amid hopes of a near-term ECB rebound. However, the recent political turmoil in France and the breakdown of technical support have shifted sentiment decisively bearish. The pair’s inability to sustain momentum above $1.17 reinforces the view that further losses are likely unless political stability returns.

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