EUR/USD: A target: $1.1012

The euro resumed its decline against the USD following a very brief period of consolidation, as traders continued to digest the particularly hawkish tone adopted by the Fed last week at the conclusion of its first post-summer monetary policy meeting. Meanwhile, risk appetite remained extremely subdued as the UN General Assembly convened today, facing a packed agenda and highly thorny issues - foremost among them the conflicts between Washington and Tehran, and between Moscow and Kyiv.

French budgetary concerns are weighing on the single currency, with the spread exceeding 100 basis points - currently the widest gap relative to Germany within the eurozone. "The potential deadlock over the 2027 budget negotiations and the nature of proposals from next year's presidential candidates are naturally fueling market anxiety. At this stage, a cautious stance regarding French public debt remains advisable for bond allocations," note economists at LBPAM.

Claudia Panseri, Chief Investment Officer at UBS Wealth Management France, describes the 2027 budget outlook as "strained yet still uncertain," noting that "the government is reportedly targeting an initial deficit of around 5% of GDP for 2027 - compared to a 2026 target of close to 5.1% that is expected to be exceeded. The planned adjustment of approximately 35 billion euros (1% of GDP) would rely on 22 billion euros in spending cuts, 6 billion euros in targeted tax measures, and 7 billion euros generated by extending the corporate profit surcharge."

On Thursday evening, Prime Minister Sebastien Lecornu outlined - in an interview with *Le Figaro* - the broad strategies for achieving a total of 53 billion euros in savings, notably through freezing the civil service pay index and curbing certain pension expenditures. On the macroeconomic agenda for this Tuesday, the Richmond Fed manufacturing index is due at 16:00 (EU time).

Right now, the EUR/USD is trading at $1.14622.

KEY TECHNICAL FACTORS
Following a period of sideways movement, the downward volatility observed on 13 September, indicated a breakout direction that allows us to resume short positions on this major currency pair. The increase in volatility on 15 September - coinciding with a break below the 50-day moving average (shown in orange) - supports this scenario.

MEDIUM-TERM OUTLOOK
Based on the key technical factors mentioned, our medium-term outlook for the EUR/USD is bearish.

Our entry point is $1.1452. The target price for our bearish scenario is $1.1013. To protect invested capital, we recommend placing a stop-loss order at $1.1531.

The expected return for this strategy is 439 pips, with a risk of loss of 79 pips.