Euro Dips Below 1.1250 Amid France’s Debt Fears

The Euro (EUR) weakened below 1.1250 against the US Dollar (USD) in early Asian trading on Wednesday, as concerns over France’s debt crisis and political instability weighed heavily on the currency. Fears about France’s ability to manage its budget deficit and a recent bond market selloff have raised worries of a potential sovereign debt crisis in the Eurozone, further dragging the Euro down.

French Prime Minister Sébastien Lecornu's minority government announced plans last month for a €54bn savings drive to avoid a catastrophic downgrade or default. Political uncertainty in Spain, with the calling of a snap election, is also contributing to the Euro’s downside. Analyst Kathleen Brooks from XTB noted that Europe is facing fiscal and political challenges, with France at the center of investor concerns.

Meanwhile, expectations of another US rate hike this month have diminished following last week’s softer jobs data. Interest-rate swaps indicate a nearly 20% probability of a Fed rate hike in October, according to the CME FedWatch tool. This easing expectation could weigh on the US Dollar and provide some support to the EUR/USD pair. However, the Euro remains under pressure due to systematic short positioning by traders, as highlighted by TD Securities.

Technical analysis shows that EUR/USD holds a bearish near-term bias, with the currency pair trading below key moving averages. The Relative Strength Index (14) at 26.08 suggests oversold conditions, which could lead to corrective rebounds rather than a sustained decline. Immediate support is seen at 1.1168, with resistance at 1.1405 and 1.1500.