EUR/USD Price Forecast: Loses ground below 1.1250, bearish technical prevails below 100-day SMA
- EUR/USD weakens to around 1.1225 in Wednesday’s early European session.
- French official will tap its military to help maintain order at planned protests coming weekend.
- Negative outlook for the cross prevails below the 100-day SMA, with bearish RSI momentum.
- The initial contention level is seen at 1.1185; the immediate resistance level to watch is 1.1252.
The EUR/USD pair trades on a softer note near 1.1225 during the early European trading hours on Wednesday. French turmoil and fiscal concerns weigh on the Euro (EUR) against the US Dollar (USD). Traders await the speeches from European Central Bank (ECB) policymakers later in the day, including President Christine Lagarde, Philip Lane, Joachim Nagel and Piero Cipollone.
France will reinforce police with troops and mount a huge security operation for more protests planned on Saturday as the government acknowledged failures in its response to last weekend's violence, per Reuters. French Prime Minister Sébastien Lecornu also said there would be fresh curfews “where the situation requires it.”
"The worries in France are not going away anytime soon," said Tommy von Brömsen, FX strategist at Handelsbanken. "The bearish view on France will stay for a while longer, and there's much more euro weakness to be priced in,” Tommy added.
Last week, the Federal Reserve (Fed) Chair gave no preview about whether he feels more interest rate hikes will be needed or when.
"I don't prejudge meetings," said Warsh during the IMF annual meeting in Bangkok. "I don't believe in saying now what I might do at the meetings that we have in the balance of this year,” he added.
Euro seen consolidating as UOB keeps EUR/USD in defined range
Strategists at UOB Group maintain that EUR/USD remains in a sideways pattern over the near term. Referring back to their latest update from last Friday, when spot was at 1.1215, they reiterate that the Euro “has likely entered a range-trading phase, and for the time being, it is likely to trade between 1.1160 and 1.1280.” UOB continues to “hold the same view for now,” underscoring a preference for consolidation rather than a directional call at this stage.
Warsh flags investment surge and AI focus but avoids pre-committing on policy
Fed Chair Warsh delivered a moderately constructive but cautious message, with the FXS Speechtracker score at 5.6/10, slightly softer relative to the historical average of 6.1/10 and consistent with a balanced tone. The admission of being "over-scarred from the global financial crisis" underscores a persistent bias toward risk management and financial stability, even as Warsh highlights structural growth and an investment surge driven by "good policies" and refuses to pre-judge upcoming FOMC decisions. The emphasis on AI as a near-term demand-side force and a tool to improve data confidence, alongside plans for an AI field hearing and new Fed task forces, points to a forward-looking stance that could eventually reshape expectations for the Dollar if productivity and inflation dynamics shift.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated level of 127.51, signaling that the speech left the perceived policy stance firmly in hawkish territory despite the non-committal language on future meetings. The combination of a flat FXS Fed Sentiment Index and a slightly lower FXS Speechtracker score suggests markets see no immediate shift in the Fed reaction function, with Warsh’s crisis-scarred caution and focus on financial stability risks reinforcing expectations for a vigilant, data-dependent path rather than a clear dovish pivot.
Technical Analysis: EUR/USD keeps a bearish vibe below key resistance levels
In the daily chart, EUR/USD maintains a bearish near-term bias as spot remains capped beneath the 20-day Bollinger simple moving average and the 100-day simple moving average (SMA). Price is also holding below the upper Bollinger band, reinforcing the idea of a market contained within a broader downside structure. The Relative Strength Index (14) at 39.6 sits in bearish territory but above oversold thresholds, hinting at persistent selling pressure rather than exhaustion.
On the downside, the October 19 low of 1.1185 acts as an first support level for the cross, followed by the lower limit of Bollinger band at 1.1115. A clear break below this level would likely open the path for the 1.1000 psychological level and then the May 12, 2025 low of 1.0951.
On the bright side, initial resistance level is located at the 20-day Bollinger SMA around 1.1252, en route to the upper boundary of Bollinger band near 1.1390. Any follow-through buying above the mentioned level could pave the way to the 100-day SMA at 1.1460.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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