Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1352.
Add a stop-loss at 1.1158.
Timeline: 1-2 days.
Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1158.
Add a stop-loss at 1.1350.
The EUR/USD exchange rate wavered as traders reacted to the ongoing debt crisis in top European countries. It was trading at 1.1260, down modestly from the August high of 1.1708, with focus shifting to the upcoming Federal Reserve minutes.
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France Debt Crisis Continues
The EUR/USD pair has come under pressure in the past few weeks as investors watched the ongoing crisis in Europe. Precisely, there are concerns about France, a country whose debt has soared.
French borrowing costs have jumped to the highest level since 2002, with the gap with Germany being the widest since 2011. The ten-year yield rose to 4.99% last week before pulling back to 4.785%. In contrast, Greece’s 10-year yield stands at 4.40%.
Therefore, there are concerns that another European debt crisis is on the way. This time, however, it will be France, a country with a GDP of over $3.6 trillion, much higher than Greece’s $365 billion.
Other European countries are also facing challenges. Spain is heading towards an election in November, while Italy’s debt is still elevated. Even Germany, a country that has long been highly conservative, has seen its debt surge in the past few months.
The EUR/USD pair will next react to the upcoming Federal Reserve minutes, which will come out later today. Economists will watch these minutes for cues on what to expect in the final two meetings of the year. The Fed decided to hike interest rates by 0.25% in this meeting, with officials hinting that they will hike again.
Odds of another Fed hike have continued rising on Polymarket and Kalshi. However, these odds have slipped recently after the US published weak macro data last week. The headline personal consumption expenditure (PCE) dropped in August, while the unemployment rate rose to 4.2%.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair has slumped from its August peak of 1.1708 to a low of 1.1158 on Monday. It has moved below the key support level of 1.1383, which marked its lowest points in August last year and in June and July this year.
The pair has also slumped below the Strong, Pivot, Reverse level of the Murrey Math Lines tool. It has also remained below the 50-day moving average.
On the positive side, the pair formed a hammer candle on Monday. As such, the pair may rebound to 1.1352 and then resume the downward trend.
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