EUR/USD Drops Toward 1.1150 as Bearish Bias Persists

Key Moments

Euro Softens as Fiscal Concerns Weigh and Policy Decisions Loom

EUR/USD traded lower around 1.1165 during the early European session on Tuesday, with the Euro (EUR) continuing to lose ground against the US Dollar (USD). Fresh worries over France’s fiscal position added to broader financial strains across the Eurozone, pressuring the single currency.

Market participants were focused on key central bank decisions scheduled for later in the week, with both the Federal Reserve (Fed) and the European Central Bank (ECB) in the spotlight for upcoming interest rate announcements.

Fed Expectations: Rates Seen on Hold, Market Pricing Confirms

The Fed was widely expected to leave its benchmark interest rate unchanged on Wednesday. According to pricing referenced from the CME FedWatch Tool, traders assigned nearly an 89.5% probability that policymakers would keep rates steady at the prevailing target band of 3.75% to 4.0%.

“The fundamental issue with the euro hasn’t changed and spreads have tightened,” said Kit Juckes, chief global FX strategist at Societe Generale. “Euro is still vulnerable at this point because the growth outlook isn’t good and energy prices are still elevated,” Kit added.

ECB Outlook: No Immediate Move Seen, December Hike Expected in Poll

The ECB was viewed as likely to maintain its deposit rate at 2.50% at its October meeting on Thursday, based on expectations cited from a Reuters poll. The same survey indicated respondents anticipated a 25-basis-point increase in December, with inflation running at close to twice the ECB’s 2% objective.

Dollar Support from Rates and Commodities Moves

Analysts at Commerzbank pointed to a more cautious backdrop across rates and commodity markets. They noted that “the US Treasury yield curve flattened slightly, with the short-end higher [while] the long-end edged lower.” At the same time, they observed that “Brent crude oil prices pulled back from a near six-month high as diplomatic activity around the US-Iran conflict offered some relief to energy markets,” while “the USD was slightly firmer.”

Warsh Speech: Balanced Tone on Growth, AI, and Policy Path

Fed Chair Warsh’s latest remarks were assessed as moderately less influential relative to past speeches, with a score of 5.6/10 on the FXS Speechtracker compared with a 6.1/10 historical average. The comments suggested a cautious stance, with Warsh acknowledging being “over-scarred” by the global financial crisis, even as he emphasized structural growth and rising investment tied to “good policies.” Warsh also declined to offer any advance commitment on forthcoming FOMC choices.

He highlighted artificial intelligence as a near-term driver of demand and as a tool for improving data reliability, while also emphasizing attention to negative tail risks. This combination underscored a measured approach that balanced optimism about innovation with concern for financial stability.

The FXS Fed Sentiment Index was unchanged, moving 0.00 points to 127.51. The elevated and stable reading indicated that investors continued to interpret Warsh’s focus on price stability and solid investment dynamics as aligned with a stance favoring either maintaining or further tightening policy, rather than signaling a pivot toward a more dovish outlook for the Dollar.

Technical Picture: EUR/USD Retains Bearish Structure

On the daily chart, EUR/USD preserved a negative near-term bias, with spot trading below the 100-day Simple Moving Average and under the middle line of the Bollinger Bands. The pair moved along the lower half of the volatility band, with price positioned only slightly above the lower band.

The Relative Strength Index (14) stood at 33.6, hovering just above oversold territory. This indicated that selling pressure remained in place, although it was becoming increasingly extended.

Key Technical Levels for EUR/USD

On the downside, the lower Bollinger Band at 1.1140 provided the nearest support. A sustained break beneath that level would bring the 1.1100 psychological area into focus, followed by the May 12, 2025 trough at 1.0951.

On the topside, the first notable hurdle appeared at the middle Bollinger Band around 1.1215. Above that, attention would shift to the upper band near 1.1295. A clear move beyond this region could open the way toward the 100-day Simple Moving Average at 1.1445, which was seen as a more distant ceiling reinforcing the prevailing bearish framework.