EUR/USD Price Forecast: Drops below 1.1200 with bearish bias intact beneath key technical resistance

• Early European trading on Friday sees EUR/USD ease towards 1.1195.
• Trading below the 100-day SMA keeps the pair’s outlook bearish, reinforced by negative RSI momentum.
• At 1.1255 lies the nearest resistance, while 1.1132 marks the initial downside objective.

German Industrial Production, Eurozone Retail Sales and US employment figures are due later on Friday, potentially prompting a more cautious market mood ahead of their release. In early European trading, EUR/USD is on the back foot at around 1.1195.

Following a worldwide sell-off in AI shares, demand for safe-haven assets could lend the US dollar (USD) some support against the Euro (EUR). Dilin Wu, research strategist at Pepperstone, said: "The dollar is getting some support from safe-haven demand,"

By contrast, traders are trimming expectations of further Fed rate rises following the Democrats’ victory in the US midterm elections. According to the CME FedWatch tool, Fed funds futures now imply a probability of around 70.9% for a 25-basis-point interest rate increase in December, down from more than 82.7% on Wednesday.

September’s US Nonfarm Payrolls (NFP) report is expected to show 65,000 additional jobs, with the Unemployment Rate forecast to remain at 4.2% over the same period. Friday’s labour market releases will be the main focus, as they may provide clues to the Fed’s interest rate trajectory.

Eurozone yields fall as Euro inflation figures anchor swaps

October’s preliminary Euro Area CPI figures were a notable release in an otherwise quiet session for data yesterday, according to analysts at Deutsche Bank, “although we did get the Euro Area flash CPI print for October.” Describing the outcome, they say it “came in as expected by the consensus, with headline inflation up to a 3-year high of +4.0% in October, whilst core inflation remained at +2.5%.” Turning to bond markets, the analysts report that “yields on 10yr bunds (-5.8bps) fell to 3.27%, whilst 10yr OATs (-17.6bps) saw their biggest daily decline since April, falling to 4.77%.” The shift, they add, “also pushed the Franco-German 10yr spread down by -11.8bps to 150bps, marking its tightest level in the last couple of weeks.” They emphasise the effect on inflation pricing: “that led to a huge decline in inflation expectations, with the Euro 1yr inflation swap (-25.9bps) down to a two-month low of 3.10%, whilst the 1yr US inflation swap (-24.9bps) hit a two-month low of 2.16%.”

Persistent inflation risks and tariff uncertainty shape Lagarde’s message

A score of 6.2/10 on FXS Speechtracker puts ECB President Lagarde’s speech slightly above the historical average of 5.6/10, indicating a somewhat more hawkish stance. Her insistence that it is “still necessary to apply tools to avoid inflation running away”, alongside the challenge of distinguishing supply-driven shocks from those driven by demand, suggests that the European Central Bank remains wary of easing policy. That stance offers modest support to the Euro.

Any pronounced bullish response in the Euro is tempered by continuing uncertainty over trade and growth. Lagarde highlighted this by saying that US tariffs were unlikely to be reconsidered soon and that US mid-term votes might influence tariffs only gradually. Her reference to the opposing effects of the energy shock and AI illustrates the complexity of the macroeconomic environment. It suggests that the ECB will take its cues from data released between now and December, leaving the Euro responsive to economic indicators and policy headlines.

Technical Analysis: EUR/USD remains under pressure beneath the 100-day SMA

Below the 100-day simple moving average (SMA), EUR/USD retains a bearish short-term structure on the daily chart. Tentative buying interest is apparent as the price sits just above the 20-day Bollinger middle band. However, with the Relative Strength Index (14) at 44, beneath the neutral threshold of 50, recovery momentum remains limited within an otherwise negative outlook.

A move higher would first encounter resistance at the upper Bollinger band around 1.1255. Beyond that lie the 28 July low of 1.1353 and the more substantial obstacle of the 100-day SMA near 1.1415. Sustained buying above the latter could lift the pair towards the 7 August high of 1.1581. 

The lower Bollinger band around 1.1132 provides the nearest support. Should that area give way, the psychological 1.1100 level would come into view, ahead of the 12 May 2025 low of 1.0951. 

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