1.1200 gives way: EUR/USD price forecast remains bearish below key technical resistance

1.1195 is the level EUR/USD eases towards in early European trading on Friday.
Below the 100-day SMA, the outlook for the pair remains negative as the RSI signals bearish momentum.
At 1.1255 lies immediate resistance, while 1.1132 marks the initial downside target.

1.1195 is where EUR/USD trades on a softer footing early in Friday’s European session. With German Industrial Production, Eurozone Retail Sales and US employment reports scheduled for release later on Friday, markets may adopt a cautious stance as the day progresses.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Following a global sell-off in AI stocks, 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 for further Fed rate increases following the Democrats’ victory in the US midterm elections. According to the CME FedWatch tool, Fed funds futures now imply around a 70.9% probability of a 25-basis-point interest rate rise in December, down from more than 82.7% on Wednesday.

Friday’s focus will be US labour market figures, which may provide clues to the Fed’s interest rate trajectory. Forecasts point to 65,000 additional jobs in September’s US Nonfarm Payrolls (NFP) report, with the Unemployment Rate expected to hold at 4.2% for the same period.

+4.0% Eurozone inflation frames swap moves as yields fall

Deutsche Bank analysts describe yesterday’s session as thin on economic releases, adding: “although we did get the Euro Area flash CPI print for October.” Their assessment of the figures is that they “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 rates, the bank reports 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 analysts add that this “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%.”

6.2/10 Lagarde speech score highlights inflation and tariff risks

At 6.2/10, ECB President Lagarde’s speech registers modestly above the historical average of 5.6/10 on FXS Speechtracker, indicating a slightly more hawkish stance. Her emphasis that it is “still necessary to apply tools to avoid inflation running away”, alongside the challenge of separating supply-driven shocks from demand-driven ones, suggests the European Central Bank remains wary of easing. That position offers the Euro some support at the margin.

Trade and growth uncertainty remains evident in Lagarde’s view that US tariffs are unlikely to be reconsidered soon and that US mid-term votes may influence tariffs only over time. Those remarks limit the scope for a strongly bullish Euro response. Her reference to the opposing forces of the energy shock and AI also highlights a complicated macroeconomic environment. This suggests incoming indicators will guide the ECB between now and December, leaving the Euro responsive to economic releases and policy news.

Technical Analysis: 100-day SMA caps EUR/USD as bearish bias persists

Below the 100-day simple moving average (SMA), EUR/USD retains a bearish short-term setup on the daily chart. Trading just above the 20-day Bollinger middle band suggests tentative buying interest around current levels. However, the Relative Strength Index (14), at 44, remains under the neutral 50 threshold, pointing to limited recovery momentum against an overall downside bias.

The upper Bollinger band near 1.1255 provides the first resistance on any advance. Beyond it sit the 28 July low of 1.1353 and the more substantial hurdle at the 100-day SMA, around 1.1415. Sustained buying above that level could lift the pair towards the 7 August high of 1.1581.

The lower Bollinger band near 1.1132 offers immediate downside support. Should that area give way, the next level in view would be the psychological 1.1100 mark, 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.)

Euro: key questions answered

20 EU countries share the Euro

Used by the 20 European Union countries within the Eurozone, the Euro ranks second globally for trading activity, behind the US Dollar. Its share of all foreign exchange transactions reached 31% in 2022, with average daily turnover exceeding $2.2 trillion. An estimated 30% of all transactions involve EUR/USD, making it the world’s most actively traded currency pair. Next come EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

ECB policy and its influence on the Euro

Based in Frankfurt, Germany, the European Central Bank (ECB) serves as the Eurozone’s reserve bank, setting interest rates and overseeing monetary policy. Price stability is its central mandate, pursued through either inflation control or measures to stimulate growth. Raising or cutting interest rates is its main policy instrument. Higher relative interest rates, or expectations of an increase, generally support the Euro; the reverse also applies. Monetary policy is decided by the ECB Governing Council at eight meetings each year. The decision-makers comprise the heads of Eurozone national banks and six permanent members, among them ECB President Christine Lagarde.

2% inflation target shapes the Euro’s response to price data

Measured through the Harmonized Index of Consumer Prices (HICP), Eurozone inflation is a key economic indicator for the Euro. A higher-than-expected reading, particularly one above the ECB’s 2% target, requires the central bank to raise interest rates to regain control of inflation. When rates exceed those in other economies, the Euro usually benefits. The higher returns make the region a more attractive destination for global investors’ funds.

75% economic share makes the four largest Eurozone economies key

The Euro can react to economic releases because they provide a measure of economic health. GDP, Manufacturing and Services PMIs, employment figures and consumer sentiment surveys can each shape the single currency’s direction. Economic strength supports the Euro by drawing in foreign investment and potentially prompting the ECB to raise interest rates, directly strengthening the currency. Weak figures, by contrast, are likely to weigh on the Euro. Particular attention is paid to Germany, France, Italy and Spain. Together, these four largest euro area economies represent 75% of the Eurozone’s economy, making their data especially important.

Trade Balance links export demand to the Euro

The Trade Balance is another release with significance for the Euro. Over a specified period, it compares a country’s export earnings with its expenditure on imports. Strong foreign demand for a country’s exports creates additional demand for its currency as overseas buyers seek to purchase those goods, lifting its value. A positive net Trade Balance therefore supports a currency, while a negative balance has the opposite effect.