Euro Dips on USD Revival Ahead of Fed Chair Warsh Remarks

Key Moments

EUR/USD Softens as Traders Await Warsh

The EUR/USD pair moved lower during the Asian session on Friday, extending its retreat from the weekly peak around the 1.1240 area reached the previous day. Despite the pullback, the pair did not attract aggressive selling and remained above the 1.1200 level as market participants waited for comments from U.S. Federal Reserve (Fed) Chair Kevin Warsh before committing to new positions.

Warsh is scheduled to speak at the Annual Meetings of the International Monetary Fund (IMF) and World Bank Group in Bangkok. His comments will be closely watched for insight into the Fed’s policy trajectory. Any signals from Warsh are expected to shape U.S. Dollar (USD) price action at a time when expectations have been building for at least one additional Fed rate hike this year, potentially setting the next directional move in EUR/USD.

U.S. Inflation Data and Yields Support the Dollar

Stronger-than-expected U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) releases earlier in the week reinforced market expectations that the Fed will lift rates again in December. At the same time, U.S. bond yields appeared to have steadied after an overnight decline. The combination of firm rate expectations, stable yields, and ongoing geopolitical risks bolstered demand for the safe-haven Greenback, exerting pressure on the EUR/USD pair.

UOB Outlook: October Pause, Hikes Resuming in 2026

Economists at UOB Group noted that markets have “increased the probability of an Oct rate hike,” but they continue to anticipate that the Fed will keep policy unchanged at the upcoming FOMC gathering. They see the October outcome as being limited “due to the proximity to the midterm elections” and “heightened event risk,” maintaining their base case that “the Fed will remain on pause for Oct FOMC.”

Looking further ahead, UOB projects that the tightening cycle will eventually restart, expecting “a 25bps hike in Dec 2026 and another in 1Q 2027,” or, in their alternative wording, “a 25-bps rate hike in Dec 2026 FOMC and another hike in 1Q-2027.” Following these moves, the bank forecasts that the Fed will “be on hold for the rest of 2027” and “keep policy on pause for the rest of 2027.”

Geopolitics and Eurozone Debt Concerns Favor the USD

In the Middle East, the Iran-backed Houthi group launched a deadly missile strike on the presidential palace in Aden, the interim capital of Yemen’s government. The incident added to already heightened tensions between the Houthis and Saudi Arabia and unfolded against the backdrop of a U.S.-Iran standoff over the Strait of Hormuz. These developments have strengthened the case for further appreciation of the USD as investors seek safety.

On the European side, the common currency has been constrained by worries about France’s rising public debt and budget deficit. These concerns have limited appetite for the euro and suggest that EUR/USD may continue to face downside risks. The backdrop implies that the prevailing bias remains lower, and traders are urged to be cautious about positioning for a sustained recovery from the 17-month trough registered on Wednesday.

Technical Picture: Bearish Bias Dominates

On the 4-hour chart, EUR/USD maintains a bearish short-term configuration as it trades below the 100-period Simple Moving Average (SMA). The pair is also holding under the 23.6% Fibonacci retracement level, implying that any rebounds are likely to encounter selling pressure.

On the downside, the primary support is located at the recent cycle anchor near 1.1114. A break below this area would pave the way for a more pronounced decline in the sessions ahead. On the upside, the first barrier sits at the 23.6% retracement level at 1.1254, followed by the 100-period SMA around 1.1264. Additional resistance is clustered at the 38.2% retracement at 1.1341 and the 50.0% retracement at 1.1411. Collectively, these resistance zones reinforce the broader bearish setup as long as they cap the advance.