- EUR/USD gains follow-through traction as the overnight slide in US bond yields weighs on the USD.
- Geopolitical risks and a hawkish Fed limit USD losses, while France’s debt crisis caps the Euro.
- The bearish technical setup also warrants caution before positioning for any further appreciation.
The EUR/USD pair attracts buyers for the second straight day, rising to the 1.1225-1.1230 area during the Asian session on Friday amid a weak US Dollar (USD). Spot prices, however, remain confined within a range held since the beginning of this month, warranting some caution for bulls.
President Donald Trump said on Thursday that the US would refrain from resuming military strikes on Iran before the November 3 midterm elections, which, along with the overnight slide in US bond yields, prompts some USD profit-taking. The geopolitical risk premium, however, remains in play amid the US-Iran standoff over Tehran’s nuclear program. Moreover, the US Federal Reserve’s (Fed) hawkish tilt should help limit deeper USD losses and cap the EUR/USD pair.
Furthermore, concerns about France’s deepening debt levels and political gridlock ahead of next year’s election might hold back traders from placing aggressive bullish bets on the shared currency. This, along with a bearish technical setup, suggests that strong follow-through buying is needed to confirm that the EUR/USD pair has formed a near-term bottom and is positioned for an extension of this week’s modest recovery from the 1.1160 region, or the lowest level since May 2025.
Against the backdrop of a fall from the August monthly swing high, the recent range-bound price action might still be categorized as a bearish consolidation phase. Moreover, the Relative Strength Index (RSI) around 50.4 signals neutral momentum after recovering from oversold readings, while the Moving Average Convergence Divergence (MACD) has turned modestly positive, hinting at a potential pause rather than a clear reversal against the prevailing overhead resistance.
Hence, any subsequent move up is more likely to confront stiff resistance near the 1.1280 region, or the top boundary of the trading range. This is closely followed by the 1.1300 mark, which, if cleared, could trigger a short-covering rally to the next relevant hurdle near the 1.1355-1.1360 zone. The move up, however, might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly amid the underlying bullish sentiment surrounding the USD.
Nevertheless, the broader setup reinforces a broader downside structure. On the downside, weakness below the 1.1200 mark will expose the trading range support near the 1.1160 region. Failure to defend the said area will be seen as a fresh trigger for bearish traders and set the stage for deeper losses.
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