Euro Holds Lead Over Dollar Amid Rates & France Risk

Written by Sandra Leggero

Sandra Leggero has a background in financial markets, having spent more than 9 years in commodities trading for several European and Asian companies. She holds a degree in Economics from the University of Pavia and specializes in emerging markets.

, | Updated: October 23, 2026

Key Moments

EUR/USD trades around 1.1225 after rebounding from below 1.1200, but remains locked inside a one-week range.
US Dollar stays near a multi-week low as Treasury yields fall below 5% and Fed officials signal no urgency to hike rates.
France’s sovereign debt and political challenges, along with elevated geopolitical tensions, constrain further Euro upside and curb aggressive USD selling.

Euro Advances Cautiously as Dollar Weakness Persists

The EUR/USD pair extends its recovery during the Asian session on Friday, adding to the prior day’s rebound from levels below 1.1200. The move draws fresh buying interest, though the advance remains limited, with the pair fluctuating around the 1.1225 area and still confined to a trading band that has held for about a week amid conflicting fundamental drivers.

Falling Yields and Fed Signaling Pressure the Dollar

A rotation out of Artificial Intelligence (AI) and technology shares into safe-haven government bonds has pushed the yield on the benchmark US Treasury to its lowest point in more than a month and back under the 5% mark. At the same time, recent commentary from US Federal Reserve (Fed) officials has indicated that policymakers see no immediate need to raise interest rates. Together, these factors have kept the US Dollar subdued near the three-week trough reached on Thursday, supporting EUR/USD.

Despite the current softness in the Greenback, last week’s US inflation data reinforced expectations that the Fed is likely to deliver another rate increase. According to CME Group’s FedWatch Tool, market participants are pricing in about an 80% probability that the Fed will raise borrowing costs in December. Concerns about inflation stemming from volatile oil prices continue to underpin the case for additional tightening, which, combined with ongoing tensions in the Middle East, may limit the extent of any further downside in the US Dollar.

Geopolitical Risk Premium Supports USD as France Weighs on Euro

Geopolitical developments remain a critical backdrop for currency markets. Iran’s Islamic Revolutionary Guard Corps (IRGC) stated that further US attacks could prompt Tehran to invade neighboring countries and strike bases used in US military operations as part of a new offensive strategy. This follows a report that the US and Israel have prepared detailed plans for renewed strikes against Iran. These factors keep the geopolitical risk premium elevated and may discourage traders from adding aggressively to bearish USD positions.

On the European side, a deepening sovereign debt and political crisis in France continues to act as a headwind for the common currency. This backdrop is likely to restrain stronger gains in the EUR/USD pair, even as the Dollar remains on the defensive.

Data Calendar: PMIs, FOMC, GDP and PCE in Focus

Market participants are now turning their attention to upcoming macroeconomic releases for clearer direction. Flash Purchasing Managers’ Index (PMI) readings from both the Eurozone and the United States are awaited for near-term signals on growth and activity. Beyond that, the primary focus is shifting toward the two-day Federal Open Market Committee (FOMC) meeting beginning next Tuesday, alongside key US data: the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index, which could significantly influence expectations for Fed policy and the path of the US Dollar.

EUR/USD Technical Landscape

From a technical standpoint, EUR/USD maintains a bearish near-term tone as long as it trades below the 50-day Simple Moving Average (SMA) at 1.1437 and beneath all key Fibonacci retracement levels derived from the 1.1116–1.1710 advance.

Immediate resistance is seen at the 23.6% Fibonacci retracement level at 1.1256. Above that, a dense resistance zone extends from the 38.2% retracement at 1.1343 to the 50.0% retracement at 1.1413, which is further reinforced by the 50-day SMA at 1.1437. Additional resistance levels are located at the 61.8% retracement at 1.1483 and the 78.6% retracement at 1.1583, ahead of the cycle high at 1.1710.

On the downside, the nearest notable structural support is the Fibonacci anchor at 1.1116. Buyers may look to defend this zone if EUR/USD resumes its decline.