• EUR/USD strengthens to near 1.1190 in Friday’s early European session.
• The ECB voted to hold interest rates steady on Thursday.
• The pair keeps a negative bias under the 100-day SMA, with bearish RSI momentum.
• The first upside barrier emerges at 1.1200; 1.1135 acts as an initial support level.

The EUR/USD pair trades in positive territory around 1.1190 during the early European trading hours on Friday. A hawkish pause from the European Central Bank (ECB) provides some support to the Euro (EUR) against the US Dollar (USD). Traders brace for the preliminary readings of Q3 Gross Domestic Product (GDP) from Germany and the Eurozone later on Friday.

The ECB decided to hold its deposit rate at 2.50%, as widely expected, after raising it by 25 basis points (bps) in September. According to a statement, the Governing Council said that rising energy prices posed upside risks to the inflation outlook and downside risks to growth, but that underlying inflation and wages were so far broadly stable.

Money markets were pricing in around a 67% chance of a rate hike in December following the announcement, according to LSEG data.

Euro holds steady as ECB faces energy shock and December hike debate

Strategists at Scotiabank note that market pricing still leans toward additional tightening, with “markets expect a further 25bps hike in December, where many forecasters (including Scotia) think policymakers will halt.” They caution that “we likely won’t get insight into that prospect today,” but expect President Lagarde to “frame the outlook in a way that keeps the door open to a December move amid elevated energy prices whilst maintaining optionality in the face of uncertainties.”

The bank highlights the inflation challenge posed by the energy backdrop, pointing out that “benchmark European Natgas prices are roughly double the ECB’s September forecast and some 30% above the ‘adverse’ scenario amid tight supplies and low storage.” From a technical perspective, Scotiabank remains “neutral/bearish – The EUR remains technically soft but key support defined by the mid-October low at 1.1113 continues to hold.”

Lagarde flags upside inflation risks but sticks to measured Euro stance

The FXS Speechtracker score of 6.2/10 is only marginally above the historic 6.1/10 baseline, signalling a broadly consistent tone with a slight tilt toward concern on inflation. Lagarde highlighted that the Euro area economy is expanding in Q3 and that near-term growth should be underpinned by AI investment, government spending and a pickup in exports, but also stressed that renewed energy price increases, tighter financial conditions and fiscal uncertainty are weighing on confidence and leave growth risks skewed to the downside.

On inflation, the emphasis on energy prices rising beyond the baseline, early-stage pricing chain pressures, wage growth around 2.5%-2.8% and headline inflation likely well above target in coming quarters marks a hawkish shift, reinforced by the statement that risks to inflation are to the upside. Yet the unanimous decision to hold rates, the focus on a “measured approach” and the importance of incoming data and underlying inflation in the next information-rich period suggest the ECB is not pre-committing to further tightening, which tempers the hawkish bias and keeps the Euro supported but capped pending new data.

Technical Analysis: EUR/USD retains a negative tone under the 100-day SMA

In the daily chart, EUR/USD retains a bearish tone as it holds below the 100-day simple moving average (SMA) and beneath the Bollinger Bands middle line. The pair is edging closer to the lower Bollinger band support, while the 14-period Relative Strength Index around 41 remains subdued, suggesting weak recovery momentum despite the recent stabilization.

On the topside, immediate resistance level is clustered near the Bollinger Bands middle line at 1.1200, en route to the upper boundary of Bollinger band 1.1265 and the June 24 low of 1.1325. The next hurdle to watch is the 100-day SMA at 1.1432. 

On the downside, the lower limit of Bollinger band at 1.1135 offers initial support level. A clear break below this level would likely open the door to the 1.1100 psychological level, followed by the May 12, 2025 low of 1.0951.