As USD steadies ahead of US midterm elections, Euro stays under pressure below 1.1200

• Monday’s strong data lend support to the USD, keeping EUR/USD bulls under pressure.
• France’s debt crisis limits the Euro’s upside as expectations of a Fed rate rise give the dollar further support.
• Ahead of key economic releases, the US midterm election results could bring fresh volatility.

Following the previous day’s modest retreat from around 1.1235, a one-and-a-half-week high, EUR/USD remains slightly weaker in Tuesday’s Asian session and appears poised to extend that pullback. The pair is trading just below 1.1200, although selling has yet to gather momentum as traders appear reluctant to commit ahead of the US midterm elections.

A Democratic victory in the House is strongly favoured by prediction markets. A Republican sweep would therefore represent a greater surprise for markets and could push US Treasury yields and the US Dollar (USD) higher. Even so, the results may generate short-term volatility and give EUR/USD fresh direction. For now, the dollar appears to be drawing support from Monday’s stronger-than-forecast US economic figures and expectations of a hawkish US Federal Reserve (Fed).

October 2026 brought a rise in the Institute for Supply Management’s (ISM) Manufacturing PMI to 55.5 from 54.5 a month earlier, extending the run of expansion to a 10th consecutive month. Meanwhile, according to the CME Group’s FedWatch Tool, markets are assigning a probability of over 70% to a December increase in US borrowing costs. These expectations support the USD, although optimism over diplomacy with Iran could limit its advance and lend support to EUR/USD.

On Monday, US President Donald Trump said an agreement to end the war could be reached, adding that Iran wanted a deal. Iranian Foreign Minister Abbas Araqchi also described consultations conducted through mediators as very intensive. Despite revised proposals, however, several days of talks involving Iranian officials and Qatari mediators produced no major breakthrough, leaving the geopolitical risk premium in place.

Against this backdrop, traders may be reluctant to take aggressive bearish positions in the USD. Together with worries over France’s mounting debt and political deadlock, this should help constrain EUR/USD’s upside. The next potential catalyst is the US JOLTS Job Openings release, followed on Wednesday by the preliminary Eurozone CPI report and US ISM Services PMI. Friday’s US Nonfarm Payrolls (NFP) report nevertheless remains the main focus.

EUR/USD on the 4-hour chart

Technical Outlook Remains Bearish

Following the retreat from August’s monthly swing high, roughly a month of sideways trading could be viewed as a bearish consolidation phase. The near-term outlook also remains negative while EUR/USD trades below the 200-period Simple Moving Average (SMA) on the 4-hour chart.

Confirmation of that bearish view would, however, require a decisive breach of support at the bottom of the trading range, close to the round-number 1.1100 level. Such a move would pave the way for further declines. In contrast, the first resistance on the upside comes from the 200-period SMA at 1.1267. A recovery above that hurdle would be needed to ease selling pressure and allow a more positive bias to develop.

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