Euro Hits 17-Month Low on Political and Fiscal Risks in Europe
The EUR/USD currency pair has dropped to its lowest level in 17 months, hitting 1.1160, as political and fiscal concerns weigh heavily on the euro. Spanish Prime Minister Pedro Sánchez's call for an early election has intensified worries about Europe's fiscal stability, while France's bond market faces scrutiny due to rising borrowing costs. Investors are closely monitoring the situation, as heavy debt loads in core euro-area economies like France and Italy make them particularly vulnerable in a high-interest-rate environment.
The eurozone's services PMI was confirmed at 53.0 in September, matching earlier estimates. However, the focus remains on political risks, particularly in France, where opposition parties show little willingness to compromise with President Macron's administration ahead of next year's election. Meanwhile, the U.S. dollar is trading at an 18-month high, despite softer-than-expected U.S. non-farm payrolls, with markets still anticipating at least one rate hike before the end of the year.
Technically, EUR/USD has fallen below its 50 and 200-day moving averages, reaching a low not seen since May 2025. While the RSI indicates an oversold condition, sellers may target further declines below 1.1160, with support levels at 1.1175 and 1.10. A recovery would need to overcome resistance at 1.130 and 1.1350 to stabilize the pair.
Meanwhile, the DAX index remains relatively muted amid Europe's political instability. Spain's snap election, scheduled for November 29, adds to the uncertainty, though declining oil prices have helped ease some inflationary pressures. ECB chief economist Philip Lane noted that the eurozone's economic activity has been better than expected, but risks remain if energy shocks intensify.
Technically, the DAX has reversed from its August high of 26,620, breaking below its rising trend line and 50-day moving average. Support is currently holding above the 200-day moving average at 24,900, with further downside targets at 24,500 and 24,000. A rebound would need to surpass the 50-day moving average at 25,565 and 25,800 to regain momentum.