EUR/USD Price Forecast: Strengthens above 1.1200, but remains capped below 100-day SMA
- EUR/USD gathers strength to around 1.1235 in Wednesday’s early European session.
- The pair keeps a bearish vibe below the 100-day SMA; further consolidation cannot be ruled out with neutral RSI momentum.
- The initial support level to watch is 1.1195; the first upside barrier emerges at 1.1255.
The EUR/USD pair gains momentum to near 1.1235 during the early European trading hours on Wednesday. The US Dollar (USD) weakens against the Euro (EUR) as early results from the US midterm elections showed the Democrats have seized control of the US Senate and won a majority in the US House of Representatives, taking control from Republicans.
"Given the Democrats are favoured right now, our expectation is that they will take control of both the House and the Senate," said Carol Kong, currency strategist at Commonwealth Bank of Australia. If that pans out, the US dollar could sell off further from here, because a Democratic sweep would limit government spending over Trump's term,” Carol added.
51 seats are needed to win the upper chamber of Congress, while 218 seats are required to build a majority in the House of Representatives. With historic wins in Texas, Iowa, Kansas, and South Carolina, the Democrats now have 52 seats. 51 seats are needed to win the upper chamber of Congress.
Meanwhile, Democrats secure 224 seats in the US House of Representatives, and Republicans win 131, according to live data from the Decision Desk HQ.
Euro upside momentum builds as EUR eyes 1.1250 resistance
Strategists at UOB Group note that the Euro’s latest push higher comes after a period of subdued price action. They recall that “two days ago, EUR briefly rose to 1.1237 and then retreated,” and when the pair was trading around 1.1190 yesterday, they highlighted that “the brief advance did not lead to any increase in upward momentum,” prompting an expectation for EUR “to trade in a range between 1.1160 and 1.1220.” The currency subsequently respected that view, holding within “a narrower range of 1.1174/1.1206” and closing “little changed at 1.1193 (+0.07%).”
However, UOB now points to a clear shift in tone after EUR “rose sharply in the early Asian session today.” They judge that “upward momentum is building, and there is room for EUR to test 1.1250,” while cautioning that “it is too early to determine whether EUR can break clearly above this level.” In a separate update, the bank reiterates that the “renewed upward momentum suggests it could test 1.1250,” but stresses that “it must close above this level before a move to 1.1280 is likely.” On the downside, UOB flags that the “strong support” level is now situated at “1.1160.”
Nagel flags likely December hike, supporting Euro upside risks
ECB’s Nagel delivers a stronger-than-usual hawkish signal, with an FXS Speechtracker score of 8.2 versus a historic 7.0, underscoring a clear tightening bias. The remark that “a rate hike in December is very likely to be necessary” and that inflationary pressures are approaching the adverse scenario points to upside risks for Euro rates and supports Euro resilience on the FX side.
Nagel’s insistence that the ECB “can and must prevent an energy price spike from causing broad-based inflation” reinforces a readiness to lean against second-round effects, adding to the hawkish tone. Confidence that France will “get a grip on its budget issues” and the statement that this is “not a task for monetary policy” suggest fiscal concerns are not yet seen as a constraint on ECB tightening, keeping Euro rate expectations skewed toward further hikes rather than an early pivot.
Technical Analysis: EUR/USD remains capped below the 100-day SMA
In the daily chart, EUR/USD remains under bearish pressure as it holds below the 100-day simple moving average (SMA), keeping the broader trend capped despite the recent rebound. Price is trading above the Bollinger Bands’ 20-day SMA middle band, hinting at a modest recovery within a still-depressed structure, while the Relative Strength Index (RSI) at 48.9 sits just below neutral, suggesting momentum is stabilizing rather than decisively turning higher.
On the downside, initial support level is seen at the Bollinger middle band at 1.1195, followed by the lower limit of Bollinger Band around 1.1132. The next contention level is seen at the 1.1100 psychological level, followed by the May 12, 2025 low of 1.0951.
On the topside, immediate resistance level aligns at the upper boundary of Bollinger Band near 1.1255, en route to the June 24 low of 1.1325. The more meaningful barrier is located at the 100-day SMA around 1.1420.
(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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