Euro Inches Up on Iran Talks; French Debt Caps Gains

Key Moments

Euro Firms Modestly as Dollar Loses Some Safe-Haven Appeal

The EUR/USD pair sees light buying interest during Monday’s Asian trading hours, trading just above 1.1150. The move higher remains tentative, reflecting opposing forces that prevent a more decisive bullish trend.

The Euro benefits from a hawkish stance at the European Central Bank (ECB). Policymakers are signaling that a rate increase in December is firmly under consideration as inflation risks rise driven by higher energy prices. This policy backdrop offers fundamental support to the single currency.

At the same time, sentiment around potential diplomatic progress in the Middle East weighs on the safe-haven US Dollar and provides a tailwind to EUR/USD. Iranian negotiators reportedly engaged in a third straight day of talks with Qatari mediators on Sunday, aiming to advance an agreement to end the US-Israeli war on Iran. Iran has also put forward a two-day (48-hour) plan to reopen the Strait of Hormuz, conditional on the US satisfying several requirements.

Geopolitics and Fed Expectations Balance Each Other

US political and military positioning remains a key part of the backdrop. US President Donald Trump said talks with Tehran have been ​productive, while maintaining the possibility of additional military actions after the November 3 midterm elections.

Simultaneously, Iran’s Supreme Leader, Mojtaba Khamenei, has instructed senior military leaders to get ready for renewed confrontation with the US and Israel and to broaden Tehran’s potential responses. These developments keep geopolitical uncertainty elevated.

Beyond the Middle East, reports of fresh Ukrainian strikes on Russian oil refineries help sustain the broader geopolitical risk premium. This, in combination with persistent expectations for further policy tightening by the US Federal Reserve (Fed), supports the Greenback and limits the scope for a stronger EUR/USD recovery.

Data from the CME Group’s FedWatch Tool indicate that market participants are assigning roughly a 75% probability to another Fed rate hike in December. Those expectations strengthened after US economic figures released on Thursday suggested continued economic resilience and ongoing price pressures.

French Fiscal Concerns Weigh on the Single Currency

On the European side, worries about France’s rising debt burden and political stalemate ahead of next year’s election add another headwind for the Euro. These concerns may restrain further gains in EUR/USD, even as the ECB maintains a hawkish bias.

Market participants are now turning their attention to the final Eurozone Manufacturing PMI readings for additional direction before the release of the US ISM Manufacturing PMI. However, the main focus this week is expected to be the US Nonfarm Payrolls (NFP) report on Friday, which could recalibrate expectations for Fed policy and the USD.

EUR/USD Technical Picture: Bearish Tone Persists

From a technical perspective, EUR/USD continues to exhibit a bearish short-term structure. The pair is trading decisively below the 50-day Simple Moving Average (SMA), currently at 1.1379, reinforcing downside bias.

On the topside, a key cluster of resistance is formed by the 23.6% Fibonacci retracement at 1.1247 and the 38.2% retracement at 1.1336. Above this zone, additional resistance is located at the 50.0% level at 1.1408, followed by further supply areas at 1.1480 (61.8%), 1.1582 (78.6%), and the cycle high near 1.1712.

On the downside, noteworthy support is identified near the structural anchor at 1.1104. Buyers may attempt to slow or counter the current bearish sequence if this level comes under pressure.