1.1200 Area: EUR/USD Eases, Price Forecast Remains Bearish Below 100-Day SMA

• 1.1210 is in focus as EUR/USD slips in early European trading on Friday.
• On Thursday, the premium required by investors to hold French government debt rather than German Bunds reached a 15-year high.
• Below the pivotal 100-day SMA, the pair’s outlook remains bearish.
• 1.1235 marks the first resistance, while 1.1185 is the nearest support to monitor.

1.1210 is the level around which EUR/USD trades lower early in Friday’s European session. French government bonds have come under pressure amid doubts over France’s capacity to address its substantial debt burden. Those concerns are also weighing on the Euro (EUR) against the US Dollar (USD).

A 6.5-basis-point rise took France’s benchmark 10-year government bond yield to 5.06%, following a brief peak of 5.1415%, the highest since July 2002. At 177.7 bps, the yield premium over German Bunds reached its widest since November 2011, during the eurozone debt crisis. The widening gap underlines mounting investor unease over France’s fiscal prospects.

Ahead of further demonstrations planned for Saturday, the French government pledged a substantially larger security operation. Troops are expected to join additional police on deployment.

Elias Haddad, senior markets strategist at Brown Brothers Harriman & Co., said: “Political gridlock and public anger over the high cost of living are making it virtually impossible to repair public finances ahead of next year’s French presidential election,”

According to Reuters, expectations point to the European Central Bank (ECB) retaining its 2.5% benchmark rate next week. Markets have nevertheless almost fully priced in an increase before year-end.

October pause, final December hike: Rabobank’s ECB outlook

An October pause is Rabobank analysts’ central expectation: “the ECB’s tightening cycle may not be over, but the next rate hike will probably not materialise this month,” they argue. They expect the central bank to “hold policy unchanged, leaving the deposit rate at 2.50%.” Their assessment is that “inflation risks are still to the upside, but they have not meaningfully increased,” and that “tighter financial conditions amplify the ECB’s rate hikes somewhat,” limiting the need for further immediate tightening.

Looking at the response to the energy shock, Rabobank assesses that “so far, the ECB has managed the inflation and growth risks of the energy shock well. They tightened proactively, but gradually.” The analysts’ outlook remains that “the persistence of inflation risks implies that the ECB maintains this trajectory, and we believe that the next (and final) step will follow in December.”

With “no compelling reason to accelerate the pace of hikes.” in its current assessment, Rabobank emphasises that “there is no evidence yet that inflation is becoming more broad-based and entrenched,” while acknowledging that “some policymakers will argue that the ECB cannot wait for clear evidence of second-round effects, because they would have to intervene more strongly after these dynamics start.”

Rabobank’s resulting conclusion is that “developments in financial markets both allow and require the ECB to take some additional time to evaluate its next steps.” The analysts “don’t think that the recent tightening of financial conditions is strong enough to prevent another rate hike,” yet warn that “market pricing of three more hikes still seems aggressive – not in the least part because favourable base effects should lessen energy inflation in early 2027.”

5.6/10: Warsh weighs investment surge and AI risks, retains data-led Fed stance

A 5.6/10 FXS Speechtracker score puts Fed Chair Warsh’s speech slightly below the historical average of 6.1/10. The message is somewhat less impactful but remains broadly aligned with the established baseline. By describing himself as “over-scarred” by the global financial crisis, Warsh reveals a cautious bias alongside his emphasis on structural growth and an investment surge supported by “good policies,”. He says the forthcoming October and December meetings will “crystalize” decisions on output, employment and inflation, without committing in advance to a policy course. His treatment of AI as a source of demand with uncertain near-term employment consequences, as well as a means of improving data and monetary policy, introduces a forward-looking awareness of risk. That emphasis moderates his optimism over the investment boom.

At 127.51, the FXS Fed Sentiment Index recorded a 0.00-point change. Its unchanged reading leaves the overall stance firmly hawkish, notwithstanding the slightly softer FXS Speechtracker result. The index’s sustained high level suggests markets continue to see Warsh’s focus on price stability, structural growth and the investment surge as signalling a preference for tighter policy. This interpretation persists as the Fed assesses tail risks linked to AI and financial stability.

100-day SMA caps EUR/USD: Technical Analysis remains bearish

Trading below both the 100-day simple moving average (SMA) and the Bollinger middle band leaves EUR/USD with a bearish near-term bias on the daily chart. The price remains in the lower half of the Bollinger envelope. At around 38, the Relative Strength Index (14) is still below the neutral 50 threshold, pointing to persistent selling pressure rather than an imminent rebound.

The Bollinger middle band near 1.1235 provides the first upside hurdle. Beyond it, the upper Bollinger band around 1.13445 represents stronger resistance. Sustained buying above that level could extend the advance to the 100-day SMA at 1.1451, adding to the broader overhead supply zone. 

Support first lies at 1.1185, the low recorded on 19 October, ahead of the lower Bollinger band at 1.1125. A decisive move beneath this zone would expose the 1.0951 level from 12 May 2025. 

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