Euro (EUR) saw a larger pullback overnight on renewed focus on French politics. Pair was last at 1.1649, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Political risk may only have short term implication on EUR

"We had earlier cautioned that FX markets have so far 'ignored' the French political drama risk and we cautioned against complacency in the near term. The risk of a French government fallout and without a leader for weeks or even months should not be ruled out. Prediction market is looking for 96% chance that the confidence vote on 8 September fails. Recall last year, a no-confidence vote gamble (although not on budget) saw the exit of former PM Barnier."

"Bullish momentum on daily chart faded while RSI turned lower. 2-way tradesstill likely. Despite the pullback we flagged, EUR is still trading the recent range. Support at 1.1620, 1.1570 (23.6% fibo retracement of Mar low to Jul high). Resistance at 1.1655/65 levels (21, 50 DMAs), 1.1750, 1.1830 levels (2025 high). That said, we acknowledged that political risk may only have short term implication on EUR and broader fundamentals should still support EUR, on a buy on dips."