EUR/USD extends losses as German data and French political turmoil weigh

• EUR/USD weakens for third day amid German data slump and prolonged US shutdown.
• Fed minutes reveal officials remain cautious on inflation despite signaling further rate cuts ahead this year.
• French PM Lecornu reports progress on talks as Macron races to appoint a new government within 48 hours.

EUR/USD extends its losses for three straight consecutive days, down 0.32% as the US government shutdown extends, and the Federal Reserve's last meeting minutes showed that officials remain cautious on inflation, despite easing policy. At the time of writing, the pair trades at 1.1622 after hitting a daily high of 1.1661.

France political turmoil and German data push the Euro lower

Euro's weakness is mainly sponsored by the French political turmoil as the outgoing Prime Minister Sebastien Lecornu revealed there have been progress in negotiations with parliamentary groups and that President Macron could be able to name a new PM in 48 hours.

Aside from this, the Fed minutes showed that policymakers were willing to cut rates further this year, but many expressed concerns over inflation. The minutes revealed that "Most participants observed that it was appropriate to move the target range for the federal funds rate toward a more neutral setting because they judged that downside risks to employment had increased."

Data-wise, the US economic docket remains absent but in Europe, German Industrial Production data plunged by 4.3% MoM stoking fears of recession in the largest economy of the bloc.

Ahead this week, the Eurozone schedule will feature Germany's Trade Balance, the European Central Bank last meeting minutes and a speech by its Chief Economist Philip Lane. In the US, Federal Reserve Chair Jerome Powell will cross the wires, followed by Governors Michelle Bowman, Michael Barr and Minneapolis Fed President Neel Kashkari.

Daily digest market movers: EUR/USD tumbles on France political turmoil

French Prime Minister Sébastien Lecornu said there is room for compromise in parliament, noting that an absolute majority in the National Assembly opposes a new dissolution. Lecornu informed President Emmanuel Macron that the likelihood of dissolution is diminishing and that current conditions should allow the appointment of a new prime minister within the next 48 hours.

The Fed Minutes revealed policymakers' debate over the response to changing risks, while most officials warned about inflation, despite acknowledging job market risks. Officials were worried about protecting the labor market and favored easing policy "further over the remainder of this year."

Fed policymakers are evenly split regarding the fed funds rate, with nine of them favoring two cuts and Stephen Miren eyeing several more, while the remaining nine projecting one one or no further rate cuts.

Money markets indicate that the Fed will cut interest rates by 25 basis points (bps) at the upcoming October 29 meeting. The odds stand at 94%, according to the Prime Market Terminal interest rate probability tool.

Technical outlook: EUR/USD collapses below 1.1650, eyes on 1.1600

The EUR/USD is neutral to downward biased, yet it remains above the 1.1600 print, which keeps the chances of trading within the 1.1600-1.1700 range. The Relative Strength Index (RSI) shows turned bearish, a sign that sellers are gathering momentum.

If EUR/USD drops below 1.1600, the n ext support would be the August 27 swing low at 1.1574, followed by August 1 cycle low at 1.1391. On the upside, the EUR/USD first resistance would be 1.1700. The next key resistance areas would be 1.1760, 1.1800 and the July 1 high of 1.1830.