EUR/USD Price Forecast: Why does the bearish tone persist below the 100-day SMA despite sustained gains above 1.1200?

• Gains in EUR/USD take the pair towards 1.1220 during early Asian trading on Monday.
• Below the 100-day average, the pair remains under pressure as the RSI signals bearish momentum.
• At 1.1270, the pair faces its first resistance, while initial support stands at 1.1185.

EUR/USD remains in positive territory around 1.1220 in Monday’s early European session, supported by a softer US Dollar (USD) against the Euro (EUR). The Dollar’s weakness comes as an extended rally in US Treasury bonds pushes yields lower. Market attention now turns to interest rate decisions from the US Federal Reserve (Fed) and the European Central Bank (ECB) later this week.

With US Treasury yields hovering around one-month lows, the 10-year yield declined to 4.97% in the previous session and the 30-year yield stood at 5.299%. Ray Attrill, head of FX strategy at National Australia Bank, said: "For the time being, it seems to point to the US bond market being in the driving seat for broader dollar performance,"

An unchanged interest rate decision from the Fed, just days ahead of the midterm elections, is the expectation among many analysts. According to the CME FedWatch tool, markets assign nearly 90.6% odds to rates remaining on hold at Wednesday’s upcoming October meeting. The probability of a December rate increase by the US central bank stands at 79.4%.

For the shared currency, however, mounting unrest in France and concerns over the country’s deteriorating budget position could create near-term pressure.

Thursday’s ECB rate decision is also in focus, with traders expecting rates to remain unchanged. After ECB President Christine Lagarde said in late September that a moderate policy response to inflation was appropriate, traders will examine the decision for any indications of the future rate trajectory.

What does Warsh’s investment and AI focus signal without a commitment on the Fed’s path?

A cautious tone places Fed Chair Warsh’s speech at 5.6/10 on the FXS Speechtracker, modestly below the historical average of 6.1/10, despite positive comments on structural growth and a surge in investment. His reference to being “over-scarred from the global financial crisis” points to a continuing preference for risk management and financial stability. Alongside this caution, Warsh stresses policy-led investment strength while declining to prejudge the October and December meetings. A focus on AI’s demand-side effects, confidence in the data and the November field hearing suggests a forward-looking approach. Without explicit policy guidance, however, the overall message remains balanced rather than distinctly hawkish.

Perceptions of the policy bias saw no material change following the speech: the FXS Fed Sentiment Index moved 0.00 points, holding at 127.51. Its position firmly above 100 continues to place the Fed in hawkish territory. The unchanged reading indicates that Warsh’s remarks largely supported the prevailing policy narrative reflected in the FXS Speechtracker.

Technical Outlook: Can EUR/USD shake off its bearish bias below the 100-day SMA?

With spot trading below both the 100-day simple moving average (SMA) and the upper Bollinger band, the daily chart continues to point to a bearish near-term outlook for EUR/USD. Just above the current price, the middle Bollinger band provides immediate resistance as the pair tests that area. Meanwhile, a 14-day Relative Strength Index reading around 40 indicates subdued, still-bearish momentum, rather than an outright oversold market.

Any recovery would first encounter resistance at 1.1270, the high recorded on 16 October, before reaching the upper Bollinger band at 1.1315. A sustained move above that level could allow a further advance towards the 100-day SMA at 1.1450. A break above the latter would be necessary to relieve the broader downward pressure.

Initial downside support lies at 1.1185, the low reached on 23 October, with the lower Bollinger band near 1.1138 providing the next floor. A decisive break below that support would clear the way towards the psychological 1.1100 mark. 

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