EUR/USD: Head and Shoulders Pattern Suggests Bears May Target 1.16–1.14 Zone

EUR/USD remains in a narrow range as the US shutdown delays key labor data.

France faces long-term political deadlock, risking a budget crisis and euro pressure.

EUR/USD may drop to 1.16–1.14 if the head and shoulders pattern confirms.

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At the start of the month, the main currency pair has been moving in a narrow range, a pattern we have seen for several months. This is partly because the was delayed due to the government shutdown, which began on October 1 and shows no signs of ending soon.

Meanwhile, in France, political tension is rising after Prime Minister Sébastien Lecornu’s government collapsed within hours. For now, markets are mostly ignoring these political events, but if the turmoil continues, it could eventually affect financial markets, including the currency pair.

Political Turmoil in France and the US Raises Market Uncertainty

France is facing a worsening financial situation. In response, then-Prime Minister François Bayrou proposed budget cuts of EUR 43.8 billion and the removal of two public holidays. This triggered strong protests led by trade unions, who resist any changes that could limit workers’ rights.

As a result, the French political scene could face a long-term deadlock, and even early elections might not solve the problem. The country’s budget situation will be closely watched by financial markets, but widespread public opposition could make necessary reforms difficult. If a debt crisis emerges in one of Europe’s largest economies, it could weigh on the euro, similar to the debt crises in southern Europe more than ten years ago.

The US government remains in a deadlock, as Republicans need some Democratic support to pass the budget. Democrats are using the situation to push for an extension of the Affordable Care Act (ACA) and to block Medicaid cuts. The shutdown is ongoing, and with Republicans taking a tough stance, it could last for a record period, potentially causing widespread layoffs in the public sector.

Will We See US Labor Market Data This Week?

The US labour market report is scheduled for release this Friday, after being postponed last week. However, due to ongoing budget negotiations, it is likely that the data may be delayed again.

Looking at the basic figures, the unemployment rate is steady, but job growth in the non-agricultural sector is clearly slowing.

This slowdown is one of the main reasons the Federal Reserve has resumed cutting , a trend expected to continue through the end of the year. If the slowdown is worse than expected, rate cuts could exceed the currently anticipated two 25-basis-point reductions.

EUR/USD Technical Analysis

EUR/USD is currently forming a head and shoulders pattern, which usually signals a potential decline. If this pattern plays out, sellers could push the price below the support at 1.1660, which forms the “neckline.”

The first target for a drop is around 1.16, while the lowest technical range could reach 1.14. This bearish scenario would be invalidated if the price moves above the right shoulder at 1.1780.

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