Below 1.1250: Euro retreats under pressure from French protests and fiscal risks

• 1.1225 is the approximate level EUR/USD has fallen to in early Asian trading on Wednesday.
• Widespread protests and fiscal risks in France kept traders cautious towards the Euro.
• A pause in Fed rates looks likely this month, with tightening expected to restart later in the year.

1.1225 is where EUR/USD is trading after retreating in Wednesday’s early Asian session. Caution over French protests and fiscal pressures weighs on the Euro (EUR) against the US Dollar (USD). Later in the day, scheduled speakers from the European Central Bank (ECB) include President Christine Lagarde, Philip Lane, Joachim Nagel and Piero Cipollone.

Some military forces will be deployed to help preserve order during another wave of protests expected this weekend, CNBC reported, citing a French official. Fresh curfews would also be introduced “where the situation requires it.” according to French Prime Minister Sébastien Lecornu.

Handelsbanken FX strategist Tommy von Brömsen said: "The worries in France are not going away anytime soon," adding: "The bearish view on France will stay for a while longer, and there's much more euro weakness to be priced in,”

In the US, attention turns to the Federal Reserve’s (Fed) next policy decision following September’s rate rise, its first since 2023. Although Fed Chairman Kevin Warsh indicated he would not “prejudge” meetings, most Fed policymakers have pencilled in at least one additional increase this year.

Around a 16.1% probability of a further quarter-point rise at the Fed’s October 27-28 meeting is now priced in by traders, according to the CME FedWatch tool. For the December policy meeting, the implied chance of a rate increase exceeds 90%.

Euro lags as Eurozone bond strains outweigh improved Germany survey

Pressure in Eurozone government bond markets continues to dampen sentiment, leaving the Euro underperforming on the day, Scotiabank strategists say. They describe the EUR as “lagging its major currency peers” and point out that the “10Y OAT/Bund spread remains elevate, near 150bps, reflecting social/fiscal tensions in France,” highlighting the enduring risk premium in French debt.

Scotiabank also draws attention to the Germany October ZEW Survey, which “reflected a solid improvement in the (still soft) Current Situation reading (-35.9 versus -44.5 expected and -47.1 in September) but some softening in the Expectations component (to 28.1, from 33).” While warning that this “survey of financial professionals tends to be heavily weighted by market, rather than economic, developments”, the bank says it “generally indicates the economy remains in ‘slow recovery’ mode,” leaving limited room for a more pronounced Euro recovery.

Warsh pairs crisis caution with optimism on investment and AI

At 5.6/10, the FXS Speechtracker score for Fed Chair Warsh’s moderately constructive remarks was slightly below the historical average of 6.1/10, suggesting limited new information for markets. His acknowledgement of being “over-scarred” by the Global Financial Crisis points to a lasting preference for vigilance over financial stability. At the same time, he emphasises structural growth, surging investment and AI’s positive contribution to data and policy confidence, without committing in advance to October or December decisions. The speech combines confidence in technology and the real economy with an explicit unwillingness to prejudge policy. Dollar traders are consequently watching the forthcoming FOMC meetings as the “crystalizing moment.”

A 0.00-point move left the FXS Fed Sentiment Index unchanged at a still-hawkish 127.51. Despite the slightly lower FXS Speechtracker score, the perceived policy stance therefore showed no material change. The index remains firmly above 100 and in hawkish territory. Structural growth, an investment surge and AI-led confidence in data continue to underpin Dollar sentiment, even without a further hawkish impulse.

Technical Analysis: 100-day SMA keeps EUR/USD under bearish pressure

Below both the 100-day simple moving average (SMA) and the 20-day Bollinger middle band, EUR/USD maintains a bearish short-term bias on the daily chart. Trading beneath the upper Bollinger band also supports a downside tilt to consolidation within the bands. Meanwhile, the Relative Strength Index (14), at about 40, remains under the neutral 50 threshold, suggesting weak bullish momentum.

Around 1.1250, the 20-day Bollinger SMA provides the first resistance level. Further barriers lie at the upper band near 1.1392 and the more important 100-day SMA at 1.1460, which restricts broader recovery attempts. The next significant support is the lower Bollinger band, at roughly 1.1115. A sustained breach of that level would likely pave the way for a steeper decline towards earlier cycle lows.

(The technical analysis of this story was written with the help of an AI tool. Know more.)