EUR/USD Key Points
- Riots and protests in France are weighing on the euro, and they come amid a broader fiscal problem.
- A break above 1.1270, the euro's highest level so far this month, could expose 1.1360 and, in time, 1.1500.
- EUR/USD has broken above its bearish channel on the 4-hour chart, with a bullish RSI divergence pointing to fading downside momentum.
France Unrest Weighs on the Euro
Nationwide protests in France over the high cost of living and declining public services turned violent over the weekend, with the interior ministry putting turnout at around 550,000 people. Ongoing riots and protests are weighing on the euro, and crucially, they are unfolding against a broader fiscal backdrop that is likely to remain a key storyline for the rest of the year.
Because the minority government is trying to pass a 2027 budget built around a €54 billion savings plan, and because that plan aims to bring the deficit down to 5%, the unrest strikes at the heart of France's fiscal credibility. The budget faces a vote on Tuesday, and bond traders are already demanding a bigger premium to hold French debt: the spread between French and German 10-year yields has widened to around 145 basis points, a two-week high, with French borrowing costs near their highest levels since 2002.
Source: TradingView, StoneX
Friday could tip the scales: Moody's is scheduled to review France's sovereign credit rating that day, and with the agency carrying a negative outlook, a downgrade is seen as the more likely outcome. The same session brings PMI surveys from both the eurozone and the US, while the US dollar is flat to start the week, keeping the focus squarely on the European side of the pair.
Against that backdrop, the market interpretation is relatively straightforward: some positive news out of France could be the catalyst for the euro to break out. Conversely, further escalation in France, a Moody's downgrade or weak PMI reports at the end of the week could all weigh on the single currency.
Euro Technical Analysis – EUR/USD 4-Hour Chart
Source: TradingView, StoneX
Turning our attention to the world's most widely-traded currency pair, EUR/USD looks cautiously constructive from a technical perspective. The pair spent all of September and the first half of October trending lower within a bearish channel, but prices have since stabilized and broken above that channel. Notably, the stabilization came with a bullish divergence in the 14-period RSI indicator, which put in higher lows even as price put in lower lows, a sign that downside momentum was fading.
From here, the short-term level to watch is 1.1270, the highest price EUR/USD has traded at so far this month. A break above that level could expose 1.1360, or in time 1.1500. On the downside, a break below about 1.1130 would be a very bearish development for the pair, leaving that range as the one to watch this week.
-- Written by Matt Weller, Global Head of Research
Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX
Frequently Asked Questions
Why are the protests in France weighing on the euro?
The protests add political risk to a country already grappling with a broader fiscal issue. Traders are questioning whether the government can push through its deficit-cutting budget, and that doubt is showing up in both French bond yields and the euro.
Has EUR/USD bottomed?
Not yet confirmed. The pair has stabilized and broken above its bearish channel with a bullish RSI divergence, but a break above this month's high at 1.1270 would be the most tangible bullish development, while a drop below about 1.1130 would undermine the recovery.
What events could move EUR/USD this week?
The key events for the euro are Tuesday's vote on France's 2027 budget and Friday's Moody's review of France's credit rating, alongside eurozone and US PMI surveys the same day.
