Above 1.1200: Euro ticks higher despite concerns over French debt

• 1.1220 is within reach as EUR/USD advances in early Asian trading on Monday.
• French debt worries and political risks could restrict the Euro’s gains.
• ECB and Fed interest rate decisions later this week are in focus for traders.

1.1220 is back in sight for EUR/USD. The pair claws back some losses in Monday’s early Asian session, although French unrest and political uncertainty could constrain further gains. Germany’s IFO reports are scheduled for release later on Monday.

For a second consecutive weekend, demonstrations across France against rising living costs and widening inequality descended into violence, CNBC reported. Approximately 410,000 people joined protests in several major cities, including Paris, according to France’s Interior Ministry.

The shared currency could face near-term selling pressure as investors weigh mounting French unrest and the country’s deteriorating budget position.

According to Reuters, the European Central Bank (ECB) is set to leave its benchmark rate at 2.5% at Thursday’s October policy meeting, although markets have almost fully priced in an increase before year-end. Following ECB President Christine Lagarde’s late-September remarks that a moderate policy response to inflation was appropriate, traders will look closely for signals on the rate outlook.

In the US, the Federal Reserve (Fed) is widely expected to maintain current interest rates, with the decision coming just days before the midterm elections.

The CME FedWatch tool puts the market-implied probability of unchanged Fed rates at Wednesday’s upcoming October meeting at nearly 90.6%. For December, markets assign a 79.4% probability to a US central bank rate increase.

1.1000 downside risk: French concerns temper Euro support from ECB hike prospects

Further ECB tightening remains possible, according to Brown Brothers Harriman strategists, who cite “above target Eurozone inflation and a resilient growth outlook give the ECB scope to deliver additional hikes,” and observe that “the swaps curve implies nearly 75bps of tightening to 3.25% in the next twelve months.” In their view, that prospective tightening “limits policy divergence with the Fed and the drag on EUR/USD.” However, BBH also warns that “France’s fiscal troubles can drive EUR/USD down to 1.1000,” highlighting how national risks could counteract support from the wider Eurozone policy environment.

5.6/10 Warsh speech score: Crisis caution, investment and AI keep Dollar bulls alert

At 5.6/10, Fed Chair Warsh’s speech ranks modestly below the FXS Speechtracker’s historical average of 6.1/10. The tone is slightly less impactful but remains broadly aligned with the established baseline. Warsh’s acknowledgement of being “over-scarred” by the global financial crisis reveals a risk-conscious bias. Alongside that caution, he points to structural growth, an investment surge fuelled by “good policies,” and AI as a near-term driver of demand whose employment effects remain uncertain. Taken together, his focus on price stability, forthcoming “crystalizing” FOMC meetings and global spillovers suggests a cautious yet constructive stance. Dollar-supportive expectations remain intact, without a commitment to a policy course for the remainder of 2026.

A 0.00-point move left the FXS Fed Sentiment Index unchanged at 127.51. That level remains firmly hawkish, even with the speech’s slightly lower FXS Speechtracker score. The persistently elevated index suggests markets continue to view the policy bias as hawkish. Warsh’s attention to risks surrounding output, employment, inflation and financial stability reinforces expectations of continued Fed vigilance, which should sustain support for the Dollar against major counterparts.

Technical Analysis: 100-day SMA keeps EUR/USD under bearish pressure

Below the 100-day simple moving average (SMA), EUR/USD retains a bearish near-term outlook on the daily chart. Trading beneath the Bollinger Bands’ middle line adds to overhead pressure, with the lower band providing the closest volatility floor. At 39.7, the Relative Strength Index (RSI) remains below 50. This points to subdued upward momentum and favours renewed tests lower unless the pair regains the mid-band area.

The Bollinger middle band, around 1.1225, provides the first upside resistance, ahead of the upper band near 1.1315. Further away, the 100-day SMA at 1.1450 represents a trend-defining hurdle. Initial meaningful support sits at the lower Bollinger band of 1.1140. A decisive breach would leave scope for the bearish phase to extend on the daily chart.

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