Euro gains amid revival in demand for French bonds, ECB-Fed policy in focus

• EUR/USD ticks up to near 1.1210 as the Euro outperforms across board.
• Moody’s kept France's sovereign rating unchanged at Aa3, defying expectations of downgrade.
• The Fed and the ECB are expected to leave interest rates steady this week.

The Euro (EUR) trades higher against its peers on Monday. In the European trade, the major currency is slightly higher at around 1.1210 against the US Dollar, but has given back some of its early gains.

What has lent support to Euro?

The Euro attracts bids as Moody’s keep France's sovereign rating unchanged at Aa3, while it was expected to downgrade.

Analysts at Danske Bank note that Moody's decision late on Friday to keep France's sovereign rating unchanged at Aa3 with a negative outlook ran counter to "wide market expectations of a downgrade." They highlight that the agency's stance rests on the assumption "that a deficit-reducing 2027 budget will be adopted and that financing costs and social tensions will abate somewhat in the coming months."

Danske Bank points out that Moody's now "expects a deficit of 5.2% of GDP next year, down from the 5.4% the government expects this year but slightly above its 5% target."

Despite Moody’s maintaining sovereign rating at Aa3, the agency warned that social unrest "could constrain fiscal consolidation efforts," continued over the weekend, albeit more calmly than the week before, and unions have already called for a nationwide strike on 5 November.

On the monetary policy front, investors await monetary policy announcements by the Federal Reserve (Fed) and the European Central Bank (ECB) on Wednesday and Thursday, respectively.

Both the central banks are expected to hold interest rates steady at their current levels. Market participants will pay close attention to monetary policy guidances, and commentary regarding whether energy supply shocks have started passing into wages and broader consumer prices.

In the Euro, German IFO Institute Business Climate Index has come in surprisingly stronger. The sentiment data improves to 90.2 in October, while it was expected to come in lower at 89.8 from 89.9 in September.

EUR/USD Technical Analysis

In the daily chart, EUR/USD trades around 1.1212, maintaining a bearish near-term tone as spot remains under the 20-period exponential moving average (EMA) at 1.1254. The pair’s inability to reclaim this dynamic barrier hints that recent downticks are still exerting pressure, while the Relative Strength Index (RSI) at about 39 stays below the neutral 50 line, suggesting only modest recovery attempts within a broader soft bias.

On the topside, immediate resistance is located at the 20-day EMA near 1.1254, and a sustained break above this level would be needed to ease the current downside pressure and open the door to a more constructive corrective phase. Until then, the absence of nearby mapped supports in the dataset leaves the latest lows as the informal reference floor, with price action likely to remain vulnerable to further slippage while below the mentioned moving average cap.

(The technical analysis of this story was written with the help of an AI tool. Know more.)