EUR/USD: Political risk premium misplaced – OCBC

Euro (EUR) slipped modestly but still traded near recent highs of 1.17 levels. Pair was last at 1.1650, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Daily momentum is mild bullish

"FX markets have so far 'ignored' the French political drama risk and we cautioned against complacency in the near term. The risk of a French government fallout and without a leader for weeks or even months should not be ruled out. Prediction market is looking for 96% chance that the confidence vote on 8 Sep fails."

"Recall last year, a no-confidence vote gamble (although not on budget) saw the exit of former PM Barnier. That said, we acknowledged that political risk may only have short term implication on EUR and broader fundamentals should still support EUR, on a buy on dips."

"Daily momentum is mild bullish, but RSI shows very tentative signs of it turning. 2-way trades likely. Resistance at 1.1750, 1.1830 levels (2025 high). Support at 1.1650/60 levels (21, 50 DMAs) and 1.1570 (23.6% fibo retracement of Mar low to Jul high)."