Euro Tops 1.1200 as ECB Stance and Softer Dollar Lift

Key Moments

Euro Sustains Recovery From Year-to-Date Low

The EUR/USD pair continues to climb for a third straight session on Friday, building on the prior day’s rebound from the 1.1100 region, which marked a new low since May 2025. The latest leg higher during the Asian session pushes the pair decisively above the 1.1200 handle, supported by several concurrent drivers.

The euro benefits from the European Central Bank’s hawkish tone, with policymakers signaling that a rate increase in December is firmly on the table as inflation risks intensify due to rising energy prices. At the same time, the US Dollar extends its pullback from a recent two-week high, weighed by a drop in US bond yields and hopes for diplomatic progress in the Middle East, both of which offer additional tailwinds to EUR/USD.

Middle East Developments and Risk Sentiment

In recent developments, US Vice President JD Vance sent a direct letter to Mohsen Rezaei, secretary of Iran’s Supreme National Security Council, in an attempt to reopen peace talks. In parallel, Qatari mediators presented Iran with a new draft proposal aimed at ending the conflict with the US and Israel. Despite these efforts, investors remain cautious as tensions escalate between Houthis in Yemen and Saudi Arabia.

Further uncertainty stems from a statement by Iran’s navy on Thursday, claiming that four oil tankers had hit sea mines in the Strait of Hormuz. This underscores the risk of supply disruptions in the Middle East and underpins elevated crude prices. Higher energy costs are stoking inflation concerns and reinforcing expectations that the US Federal Reserve may need to stay hawkish, a factor that could prevent a deeper USD slide and limit additional gains in EUR/USD.

Fed Rate Expectations and US Data Support Dollar on Dips

According to CME Group’s FedWatch Tool, market participants are currently assigning roughly a 75% probability that the Federal Reserve will raise rates again in December. These expectations were bolstered by US macroeconomic data released on Thursday, showing that growth accelerated to a 3.4% annualized pace in the July-September quarter while inflation in September remained above the Fed’s 2% objective.

This backdrop suggests scope for renewed US Dollar demand on dips, and argues for caution before concluding that EUR/USD has carved out a durable near-term bottom. Traders may therefore seek more convincing follow-through buying before positioning for a sustained upside move in the pair.

Market participants now turn their attention to the euro area’s first estimate of third-quarter GDP growth and upcoming consumer inflation data, which could offer fresh, short-term trading cues for EUR/USD.

Technical View: Key Resistance at 100-Period EMA

On the 4-hour chart, EUR/USD’s recovery is currently stalling near the 100-period Exponential Moving Average, indicating that this level is acting as an immediate technical barrier. The pair’s inability so far to reclaim this EMA suggests that upside remains constrained in the near term, even after repeated bounces from the 1.1100 round figure.

A decisive break above the 100-period EMA, located at 1.1211, would be needed to alleviate downside pressure and open the door to a more constructive recovery phase for the pair.