The Euro has dropped in value due to a rebound in the US Dollar and ongoing political uncertainties in Europe. Key issues include concerns about the French budget, a hung parliament from the Dutch elections, and lackluster French CPI figures. Even with these challenges, the overall outlook for the Euro remains supportive. In French politics, Prime Minister Lecornu’s position is shaky. Although he has survived two no-confidence votes, the left-wing coalition is pushing for a 2% tax on wealth over EUR100 million. This demand has caused tensions and could lead to budget conflicts or even a government collapse, which would impact the Euro. Currently, the daily trend shows mild bearish momentum, with the RSI decreasing. There is support at 1.1460 and resistance at 1.1630/40.

Meme Coins Face Challenges

Meme coins like Dogecoin and Shiba Inu are struggling as both large and retail investors pull back on risk. This pullback puts pressure on these digital currencies, leading to potential losses. Additionally, Cardano’s price has dropped 6% to below $0.58 due to weak on-chain activity and an increase in short positions among traders, indicating growing bearish sentiment in the market. With the US Dollar rebounding, the Euro is facing challenges from French political tensions, trading around 1.1514. The French government’s instability and budget disputes create near-term uncertainty. This situation is similar to the market anxieties during the 2022 legislative elections, which resulted in a hung parliament. The political risk is evident, as the gap between French and German 10-year government bonds has widened to 65 basis points, the highest this quarter. This indicates that bond traders are asking for a higher return to hold French debt during the ongoing budget discussions. As a result, we expect this pressure to continue affecting the Euro in the near future.

Options for Derivative Traders

For derivative traders, now may be the time to consider buying put options on the EUR/USD, with strike prices close to the 1.1460 support level, as a way to protect against further declines. This approach offers downside protection while allowing for exposure to the Euro’s potential longer-term strength. It’s a strategic response to the current political-driven volatility. This cautious sentiment is also seen in other markets, with speculative assets like meme coins and Cardano showing notable weakness. Recent on-chain data indicates that large wallet holders have been scaling back their positions, with net outflows from exchanges reaching a three-month high. This broader move to reduce risk supports the US Dollar as a temporary safe haven. Looking ahead, the key event will be the US jobs report for October, coming out this Friday. If the non-farm payroll numbers fall below the expected 150,000, it could slow down the Dollar’s rise. This would present the buying opportunity for the Euro that we have been anticipating. Create your live VT Markets account and start trading now.

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