Euro’s losing streak against US Dollar continues as focus turns to Fed-ECB policy

• Near 1.1140 against the US Dollar, the Euro extends its decline amid broader underperformance.
• Bond market concerns have resurfaced following a sharp rebound in French yields.
• Interest rates are expected to remain on hold at both the Fed and the ECB this week.

With EUR/USD dropping towards 1.1140 on Tuesday, the Euro (EUR) is heading for a fifth consecutive trading day of losses against the US Dollar (USD). Renewed unease in the French bond market is driving the Euro’s underperformance.

Following a two-day pullback, French bond yields have resumed their climb. At the time of writing, the 10-year French yield stands near 4.97%, up 1.42%.

The decline in French yields over the previous two days followed Moody’s decision to retain the sovereign’s Aa3 rating with a negative outlook, contrary to market expectations.

The Euro has also come under pressure as market participants take a cautious stance before Thursday’s monetary policy announcement from the European Central Bank (ECB). Key releases due on Friday, including Germany’s preliminary Harmonised Index of Consumer Prices (HICP) for October and Q3 Gross Domestic Product (GDP) data, have added to that caution.

Although Commerzbank analysts forecast no change in the ECB’s key interest rates, they warn that any pause could be short-lived. They say that “in December, however, it will likely raise rates once again due to persistently high inflation – unless French government bond yields do not completely spin out of control.”

Continued US Dollar strength ahead of Wednesday’s monetary policy announcement from the Federal Reserve (Fed) is adding to the pressure on EUR/USD. The US Dollar Index (DXY), which measures the Greenback against six major currencies, is trading around 102.20 at the time of writing, a gain of 0.2%.

For Deutsche Bank economists, the Fed’s forthcoming decision is unlikely to bring much change in its formal communication. They expect “the statement itself [is] to contain only limited changes, although dissents to a hold are possible.” They argue that “the interest will therefore be in Chair Warsh’s press conference and how the Fed balances still-elevated inflation and solid growth against the recent tightening in financial conditions,” as markets are likely to examine his comments closely for any change in the policy narrative.

EUR/USD Remains Under Pressure Below Short-Term Resistance

Trading at 1.1149 on the daily chart, EUR/USD continues to retreat beneath its short-term exponential moving average (9, close, 0), which stands at 1.1197 and acts as immediate resistance. The near-term outlook remains bearish while the pair holds below this average. Meanwhile, the Relative Strength Index (14), at 32, sits just outside oversold territory, suggesting that selling pressure remains in place but has not yet run its course.

A daily close above the 9-period exponential moving average, the first resistance level near 1.1197, would be required to temper the current bearish tone. The supplied dataset identifies no nearby technical support, leaving EUR/USD exposed to additional declines. Before a meaningful recovery can take shape, traders are likely to look for new horizontal support or price-action lows below 1.1149.

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