• EUR/USD posts modest gains around 1.1060 in Friday’s early European session.
• A bearish near-term outlook remains intact, with the price holding below the 100-day SMA.
• The first upside barrier emerges at 1.1100; the initial support level is seen at 1.1000.

The EUR/USD pair trades with mild gains near 1.1060 during the early European trading hours on Friday. Nonetheless, the potential upside for the major pair might be limited amid a cautious stance from the European Central Bank (ECB).

ECB policymaker Philip Lane said that energy prices may be falling, but the central bank’s interest rate ‌decisions will depend on how strongly the recent surge in fuel costs spreads to wages and other prices.

According to most economists polled by Reuters, the ECB is set to deliver a final deposit rate hike in this cycle next month, although more than a third expect an additional increase in early 2027 as inflation hits double the 2% target.

Across the pond, Federal Reserve (Fed) officials earlier this week warned that US inflation remains stubbornly elevated, with some signalling openness to a 50-basis-point rate hike if price pressures fail to ease.

Traders are now pricing in nearly a 14.5% probability of a large hike at the Fed’s December policy meeting, up from 0% last week, the CME FedWatch tool showed.

Euro stays pressured as uneven Eurozone growth limits ECB support

Analysts at NBC highlight that the Euro “remains caught between elevated inflation and an uneven growth outlook,” leaving the currency constrained despite recent data. They caution that “further rate increases could therefore offer only limited currency support if accompanied by weaker growth expectations,” suggesting that additional ECB tightening may not translate into meaningful Euro strength. With “U.S. monetary policy continuing to favour the Dollar,” NBC says it retains its “EUR/USD forecast of 0.65 at year-end, followed by a gradual recovery above 0.70 in 2025,” reflecting a view that Dollar support persists near term before the Euro stages a modest rebound.

Williams flags resilient US economy and persistent inflation, keeping Dollar supported

Fed’s Williams delivered a moderately hawkish message, with a 7/10 FXS Speechtracker score standing above the 6.1/10 historical average and underscoring a firmer policy tone relative to the established baseline. Emphasis on a “resilient” and “robust” US economy, alongside “stubbornly persistent” and “too elevated” inflation, reinforces the need for further tightening over time to restore inflation to 2%, while clarifying that monetary policy targets inflation rates rather than rolling back overall price levels. The warning that attempts to reduce price levels outright could trigger poor economic conditions signals a willingness to keep policy restrictive but not aggressively deflationary, a backdrop that tends to underpin the Dollar.

The FXS Fed Sentiment Index slipped by 0.08 points to 147.47, a marginal pullback that still leaves the gauge deep in hawkish territory. Despite the slight decline, the level well above 100 confirms that, in aggregate, Fed communication remains firmly hawkish, consistent with the stronger-than-baseline tone captured by the FXS Speechtracker.

Technical Analysis: EUR/USD maintains a nagetive tone under the 100-day SMA

In the daily chart, EUR/USD retains a bearish near-term bias as spot holds below the 100-day simple moving average (SMA) and remains confined under the Bollinger bands’ middle line. Price is now pressing the lower Bollinger band, indicating persistent downside pressure, while the Relative Strength Index (RSI) at 35.19 stays just above oversold territory, hinting that bearish momentum is still present but not extreme.

On the topside, immediate resistance level emerges at the 1.1100 psychological level, en route to the Bollinger mid-line near 1.1175 and the upper boundary of Bollinger band at 1.1280. Further north, the next hurdle to watch is the more significant 100-day SMA at 1.1400. 

On the downside, the 1.1000 round figure act as a key support level for the major pair. A breach of this level could see a drop to the May 12, 2025 low of 1.0951, followed by the May 27, 2025 low of 1.0733.