Euro Edges Up but Remains Stuck Below Key Moving Averages

Key Moments

EUR/USD Firms, Supported by ECB Tone

EUR/USD is trading in positive territory around 1.1160 in early European hours on Monday, as the Euro gains modest traction against the US Dollar. The move higher comes even as the broader technical backdrop remains cautious with the spot rate still capped beneath its 100-day simple moving average (SMA).

A more hawkish policy message from the European Central Bank (ECB) is helping to underpin the single currency. The ECB left interest rates unchanged in October, but President Christine Lagarde has kept the door open to another hike depending on incoming data. Lagarde remarked last week that the institution is closely monitoring indicators to determine whether an interest rate increase will be appropriate next month, noting, “We will have many indicators between now and December that will really help us determine whether a hike is necessary.”

US Labor Strength Bolsters Dollar Outlook

On the US side, signs of a stronger labor market are providing support for the Dollar and acting as a counterweight to Euro gains. The US economy added 165,000 jobs in October, up from 60,000 in September and above expectations. At the same time, the unemployment rate declined to 4.1% in October.

These figures have reinforced the perception that the US labor market remains solid, underpinning expectations that the Federal Reserve (Fed) stays on course for an interest rate increase in December. A firmer jobs backdrop tends to favor the Greenback and may limit the upside for EUR/USD.

Investor Positioning: Preference for Dollar Cash

Analysts at ING describe the Euro’s recent behavior as “a rather unimpressive performance,” observing that even a “large US tech sell-off is still not enough to prompt much EUR/USD buying at all.” They emphasize that “the European buy-side is running low hedge ratios on its US investments,” but the anticipated demand for the Euro has not appeared.

ING notes that “global investors are more than happy to leave their cash in dollars for the time being. In other words, we are seeing a rotation into cash and not out of the dollar.” According to them, this preference is being reinforced by “the return to more familiar correlations, where US Treasuries are now performing their safe haven role.”

Looking ahead, ING states that, “barring a soft US jobs report today, expect EUR/USD to consolidate not far from 1.12,” and flags that Eurozone participants will also be monitoring “ECB Chief Economist Philip Lane at 10:30 CET.” On the policy side, they highlight that “the market still prices 18bp of ECB hikes in December and that should remain sticky unless we see a much deeper equity correction.”

Lagarde’s Comments Highlight Policy Risks and Tariff Concerns

Lagarde’s recent speech was assessed at 6.2/10 on FXS Speechtracker, slightly above the historical average of 5.6/10 and indicating a somewhat stronger policy signal. Her emphasis that it is “still necessary to apply tools to avoid inflation running away” and that a broad range of indicators will be scrutinized before December points toward a hawkish leaning for the Euro, even as she notes the challenges in separating supply and demand influences.

She also remarked that US tariffs are unlikely to be revisited quickly and that US mid-term votes may ultimately shape trade policy, underscoring ongoing external risks that could keep Euro-area inflation elevated. Lagarde described the backdrop as one in which an energy shock and advances in AI are pulling in different directions, adding to policy uncertainty. Nonetheless, her strong focus on containing inflation suggests potential downside risk for the Dollar against the Euro if markets continue to anticipate relatively tighter ECB policy.

Technical Picture: Bearish Structure Holds Below 100-day SMA

From a technical standpoint, EUR/USD maintains a negative short-term bias on the daily chart. The pair remains beneath both the 20-day Bollinger simple moving average and the 100-day simple moving average, indicating that the broader up-move is constrained. Price action is also below the upper Bollinger band, suggesting that rebound attempts are limited, while the Relative Strength Index (RSI) is hovering near 41, pointing to mild downside momentum without entering oversold territory.

On the upside, the first resistance is situated around the 20-day Bollinger SMA near 1.1190. A move above this level would bring the upper Bollinger band, located around 1.1260, into view. Further gains would then target the June 24 low at 1.1325, followed by the 100-day SMA at 1.1412.

On the downside, immediate support is seen at the lower border of the Bollinger band, around 1.1125. A decisive break below that zone would expose the 1.1100 psychological level, with the next notable support marked by the May 12, 2025 low at 1.0951.