- EUR/USD gains ground to around 1.1220 in Monday’s early Asian session.
- France’s debt and political concerns might cap the upside for the Euro.
- Traders brace for the ECB and Fed interest rate decisions later this week.
The EUR/USD pair recovers some lost ground to near 1.1220 during the early Asian trading hours on Monday. However, the potential upside for the pair might be limited amid concerns over French unrest and political risks. Germany’s IFO reports are due later on Monday.
CNBC reported that protests throughout France over the worsening cost of living and growing inequality turned violent for the second consecutive weekend. France’s Interior Ministry reported that approximately 410,000 people participated in protests across several major cities, including Paris.
Concerns about growing unrest in France and the country’s worsening budget problems might exert some selling pressure on the shared currency in the near term.
The European Central Bank (ECB) is set to hold its benchmark rate at 2.5% at its October policy meeting on Thursday, though a hike is all but priced in before the year’s end, according to Reuters. Traders will scrutinize any hint of the rate outlook after ECB President Christine Lagarde said in late September that a moderate policy response to inflation was appropriate.
Across the pond, markets widely expect the US Federal Reserve (Fed) to leave interest rates unchanged just days before the midterm elections.
Markets are now pricing in nearly a 90.6% chance that the Fed will keep rates on hold at its upcoming October meeting on Wednesday, according to the CME FedWatch tool, with a 79.4% odds that the US central bank will raise interest rates in December.
Euro underpinned by ECB hike prospects but France risk caps upside
Strategists at Brown Brothers Harriman highlight that “above target Eurozone inflation and a resilient growth outlook give the ECB scope to deliver additional hikes,” noting that “the swaps curve implies nearly 75bps of tightening to 3.25% in the next twelve months.” They argue this prospective tightening “limits policy divergence with the Fed and the drag on EUR/USD.” At the same time, BBH cautions that “France’s fiscal troubles can drive EUR/USD down to 1.1000,” underscoring that country-specific risks may offset support from the broader Eurozone policy backdrop.
Warsh cautious on crisis scars but upbeat on investment surge and AI, keeping Dollar bulls attentive
Fed Chair Warsh’s speech scores 5.6/10 on the FXS Speechtracker, modestly below the 6.1/10 historical average, signaling a slightly less impactful but still broadly consistent tone relative to the established baseline. The admission of being “over-scarred” by the global financial crisis underscores a risk-aware bias even as Warsh highlights structural growth, an investment surge driven by “good policies,” and AI as a near-term demand catalyst with uncertain employment effects. Overall, the emphasis on price stability, upcoming “crystalizing” FOMC meetings, and global spillovers points to a cautious but constructive stance that keeps Dollar-supportive expectations intact without pre-committing on the policy path for the rest of 2026.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a level of 127.51, which remains firmly in hawkish territory despite the speech’s slightly softer score on the FXS Speechtracker. This stable, elevated reading suggests markets see the current policy bias as consistently hawkish, with Warsh’s focus on output, employment, inflation, and financial stability risks reinforcing expectations that the Fed will stay vigilant, a backdrop that should continue to underpin the Dollar against major peers.
Technical Analysis: Negative tone of EUR/USD prevails under the 100-day SMA
In the daily chart, EUR/USD keeps a bearish near-term bias as spot remains capped beneath the 100-day simple moving average (SMA). Price also holds under the Bollinger Bands’ middle line, reinforcing overhead pressure, while the lower band marks the nearest volatility floor. The Relative Strength Index (RSI) at 39.7 stays below the 50 threshold, suggesting weak upside momentum and favoring further downside probes unless the pair can reclaim the mid-band area.
On the topside, initial resistance emerges at the Bollinger middle band around 1.1225, followed by the upper band near 1.1315, with the 100-day SMA at 1.1450 acting as a more distant, trend-defining barrier. On the downside, the Bollinger lower band at 1.1140 offers the first meaningful support, and a clear break below this level would open the door to a continuation of the current bearish phase on the daily timeframe.

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