EUR/USD Price Forecast: Holds gains near 1.1250, but bearish bias holds below 100-day average
- EUR/USD gathers strength to around 1.1245 in Thursday’s early European session.
- Negative outlook for the pair remains intact below the 100-day SMA; further consolidation cannot be ruled out with neutral RSI.
- The immediate resistance level emerges at 1.1276; the support level is seen at 1.1185.
The EUR/USD pair trades in positive territory near 1.1245 during the early European trading hours on Thursday. Nonetheless, the potential upside might be limited amid fiscal concerns in France. European Central Bank (ECB) policymaker Fabio Panetta is scheduled to speak later on Thursday.
French 10-year borrowing costs climbed above 5% for the first time in 24 years on Wednesday as weekend unrest across France, fuelled in part by cuts to public services, has highlighted how politically difficult it will be to bring budget deficits under control.
"The euro cannot sell off—and it cannot rally," said Spectra Markets' president Brent Donnelly. "We are in a stalemate where the overhang of bad news just about perfectly offsets the market positioning,” Donnelly added.
The ECB is likely to leave its benchmark rate unchanged at 2.5% next week, though a hike is all but priced in before the year's end, according to Reuters.
Across the pond, traders see only a small chance of a Federal Reserve (Fed) rate hike next week, with the next interest rate increase expected in December, according to the CME FedWatch tool.
Euro range holds as EUR/USD shrugs off gas spike and bond jitters
Analysts at Societe Generale highlight that, for EUR/USD, it is “curious that cycle highs in nat gas prices and bond jitters have not triggered another leg down in a way that would have occurred prior to October.” They note that “the correlations have broken down over the past two weeks or so,” with the pair no longer reacting in its usual fashion to swings in energy prices and bond markets. According to the bank, this “would suggest that most of the bad news is priced in or investors are not committed to putting on new directional trades, playing the ranges instead.”
Warsh cautious on policy path even as investment surge and AI optimism support Dollar
Fed Chair Warsh delivered a moderately constructive but less forceful message, with the FXS Speechtracker score at 5.6 versus a 6.1 historical average, signaling a slightly softer tone relative to the established baseline. The admission of being “over-scarred from the Global Financial Crisis” underscores a risk-averse bias, even as Warsh highlights a structural growth and investment surge and refuses to pre-commit on October and December decisions, keeping policy optionality high. Emphasis on AI’s demand-side impact and the need to “crystalize” data on output, employment, and inflation points to a cautious, data-dependent stance that tempers immediate hawkish expectations for the Dollar.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated 127.51, confirming that the overall policy tone remains firmly in hawkish territory despite the slightly softer FXS Speechtracker score. The combination of a high FXS Fed Sentiment Index level and Warsh’s reluctance to pre-judge meetings suggests that markets should continue to price a restrictive bias, but without fresh hawkish escalation for the Dollar in the near term.
Technical Analysis: EUR/USD retains a negative tone in the near term
In the daily chart, EUR/USD holds below the 100-day Moving Average and also marginally under the 20-day Bollinger simple moving average, keeping the near-term bias bearish despite a mild stabilization. The Relative Strength Index (14) around 42 stays below the neutral 50 line, which suggests that downside momentum is easing rather than reversing, leaving the pair capped by overhead moving-average resistance.
On the topside, immediate resistance level is located at the October 6 high of 1.1276, en route to the upper boundary of Bollinger band at 1.1372. A more significant barrier is located at the 100-day Moving Average around 1.1455, which would need to be reclaimed to ease the broader bearish pressure.
On the downside, initial support level is seen near at the October 19 low of 1.1185, followed by the lower limit of Bollinger band at 1.1120. The key contention level to watch is the 1.1000 psychological level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro FAQs
What is the Euro?
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%).
What is the ECB and how does it impact the Euro?
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.
How does inflation data impact the value of the Euro?
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.
How does economic data influence the value of the Euro?
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.
How does the Trade Balance impact the Euro?
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.