Euro sheds early gains as oil prices rise and French fiscal risks weigh

• Multiple headwinds erase the Euro’s initial advance against the US Dollar.
• High oil prices and fiscal concerns in France maintain pressure on the Euro.
• Interest rates are expected to remain on hold at both the Fed and the ECB next week.

EUR/USD is broadly flat near 1.1234. During Thursday’s European session, the Euro (EUR) has relinquished its early gains against the US Dollar (USD). Several headwinds facing the single currency are weighing on the major pair.

Euro sentiment weakens as energy costs and French debt weigh

Sentiment has been the main driver of the Euro’s latest decline, according to strategists at Danske Bank. They stress 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 view, these pressures have deepened the existing caution towards the single currency. Investors remain reluctant to increase Euro exposure, even without a clear directional catalyst from broader markets.

WTI Oil is trading 2% higher near $99.50 at the time of writing. More expensive oil is negative for the Euro because Europe depends heavily on imports to cover its energy needs.

Friday’s preliminary October PMI releases for the Eurozone and the United States (US) are also in focus. Aggregate business activity in both economies is expected to have continued expanding, although at a moderate rate.

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

EUR/USD: Technical Outlook

At 1.1231 on the daily chart, EUR/USD remains below its 20-day Exponential Moving Average (EMA) of 1.1266. This maintains a mildly bearish outlook. The short-term EMA continues to cap the pair, indicating selling into rallies. Meanwhile, a Relative Strength Index (RSI) reading near 40 points to weak but stabilising downside momentum, rather than outright oversold conditions.

Immediate resistance lies at the 20-day EMA of 1.1266. Bulls must recover that level to relieve the prevailing pressure and create scope for a more sustained rebound. With no nearby measured support levels in the data set, spot remains exposed to further declines towards earlier price lows. Sentiment is likely to remain fragile for 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.)