Euro consolidates around 1.1200, remains close to 17-month low vs bullish USD

• EUR/USD extends its consolidative price move and remains close to the year-to-date low.
• Renewed fears of a wider Eurozone sovereign debt crisis keep Euro bulls on the back foot.
• A hawkish Fed and geopolitical risks underpin the USD, capping the upside for spot prices.

The EUR/USD pair struggles to gain any meaningful traction on Monday, trading around the 1.1200 mark, or nearly unchanged for the day during the early European session. Moreover, spot prices remain close to the lowest level since May 2025 and seem vulnerable to extend the downtrend witnessed over the past month or so.

The shared currency continues with its relative underperformance amid concerns that France’s spiraling debt crisis could spill over into other heavily indebted Eurozone nations. The US Dollar (USD), on the other hand, retains its bullish undertone amid the US Federal Reserve's (Fed) hawkish stance and tensions in the Middle East. This, in turn, keeps EUR/USD bulls on the defensive and validates the negative outlook.

Investors have been scaling back expectations for a Fed rate hike in October, though bets for a 25-basis-point (bps) increase in December remain on the table. Moreover, the US-Iran standoff keeps the geopolitical risk premium firmly in play, acting as a tailwind for the safe-haven buck. In fact, Iran’s top security official declared Washington’s response to its proposal for reopening the strategic Strait of Hormuz insufficient.

Adding to this, the Iran-backed Houthi group in Yemen escalated their campaign against Saudi Arabia and targeted Riyadh’s King Khalid International Airport with a mix of ballistic and cruise missiles, as well as drones over the weekend. The deadly attacks drew a Saudi vow of retaliation, with US President Donald Trump raising the possibility of joining strikes on the group and resuming attacks on Iran.

USD bulls, however, might opt to wait for more cues about the Fed's policy outlook before placing fresh bets. Hence, the focus will be on the release of US inflation figures – Consumer Price Index (CPI) and Producer Price Index (PPI), due on Wednesday and Thursday, respectively. Traders will further take cues from Fed Chair Kevin Warsh's speech at the annual meetings of the IMF and World Bank on Friday.

EUR/USD 4-hour chart

Technical Analysis

The recent range-bound price action witnessed since the beginning of this month could be categorized as a bearish consolidation phase against the backdrop of a decline from the August swing high. Moreover, the EUR/USD pair holds well beneath the 100-period Simple Moving Average (SMA) on the 4-hour chart, maintaining a bearish near-term bias.

On the upside, initial resistance is located at 1.1275, or the top boundary of the trading range, ahead of the 100-period SMA near 1.1324, which is the key level bulls would need to clear to ease downside pressure and open the door to a more sustained recovery. On the downside, weakness below the 1.1160 area, or the year-to-date low will be seen as a fresh trigger for bearish traders and pave the way for deeper losses.

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