Euro retreats from early gains amid French fiscal risks and higher oil prices

• Early Euro gains against the US Dollar fade as several headwinds weigh on the currency.
• Pressure on the Euro persists amid high oil prices and fiscal risks in France.
• Interest rates are expected to remain unchanged at both the Fed and the ECB next week.

Under pressure from several headwinds, the Euro (EUR) erases its earlier advance against the US Dollar (USD), leaving the major currency pair broadly flat around 1.1234 in Thursday’s European session.

How are energy costs and French debt worries weighing on Euro sentiment?

Sentiment has been the main driver of the Euro’s latest decline, according to strategists at Danske Bank, who emphasise that “the decline in the pair is driven by the combination of high energy prices and EUR-pessimism on the back of French debt worries.” In their assessment, these pressures have deepened the caution already surrounding the single currency. Investors remain reluctant to increase Euro exposure, even without a clear directional trigger from broader markets.

The continent’s heavy dependence on imported oil to meet its energy needs makes higher oil prices unfavourable for the Euro. At the time of writing, WTI Oil is trading near $99.50, up 2%.

Attention is also turning to Friday’s release of the October flash PMI figures for the Eurozone and the United States (US). Overall business activity in both economies is expected to have continued expanding, although at a moderate pace.

Next week’s monetary policy decisions from the European Central Bank (ECB) and the Federal Reserve (Fed) will provide key triggers for the Euro and the US Dollar. Both central banks are expected to hold interest rates steady.

EUR/USD Technical Analysis: Can the pair regain its short-term EMA?

A mildly bearish bias persists on the daily chart, with EUR/USD at 1.1231, below its 20-day Exponential Moving Average (EMA) of 1.1266. This short-term EMA continues to limit advances, indicating that rallies are still attracting selling. Meanwhile, a Relative Strength Index (RSI) reading near 40 points to weak but stabilising downward momentum, rather than outright oversold conditions.

For bulls, the first hurdle is the 20-day EMA at 1.1266. A move back above this immediate resistance is needed to relieve the current pressure and pave the way for a more sustained recovery. Conversely, with no nearby measured support levels in the data set, the spot rate remains exposed to further declines towards earlier price lows. Sentiment is likely to remain fragile as long as EUR/USD stays below the short-term EMA.

(The technical analysis of this story was written with the help of an AI tool. Know more.)