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

EUR/USD buyers remain under pressure, with Monday’s strong data lending support to the USD.
Expectations of a Fed rate hike bolster the dollar, while France’s debt crisis also limits the Euro’s upside.
Ahead of key macroeconomic releases, the US midterm election outcome could trigger volatility.

A mildly bearish tone persists in EUR/USD during Tuesday’s Asian session, with the pair poised to build on the previous day’s modest retreat from the 1.1235 region, a one-and-a-half-week high. Spot prices are hovering just under 1.1200. However, selling has gained little momentum as traders appear reluctant to take positions ahead of the US midterm elections.

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

With prediction markets assigning a strong likelihood to Democrats taking the House, a Republican sweep would represent a bigger surprise for markets and could push US Treasury yields and the US Dollar (USD) higher. The outcome could nonetheless generate short-term volatility and give EUR/USD fresh direction. For now, the dollar appears to be benefiting from Monday’s stronger-than-forecast US economic releases and expectations of a hawkish US Federal Reserve (Fed).

October 2026 saw the Institute for Supply Management’s (ISM) Manufacturing PMI advance to 55.5 from 54.5 a month earlier, extending the expansion to a 10th consecutive month. Meanwhile, according to the CME Group’s FedWatch Tool, traders assign more than a 70% probability to a December increase in borrowing costs by the US central bank. Although this supports the USD, hopes of diplomatic progress with Iran could restrain its gains and lend support to EUR/USD.

On Monday, US President Donald Trump said Iran wanted an agreement to end the war and that a deal was possible. Iranian Foreign Minister Abbas Araqchi also described consultations conducted through mediators as very intensive. Yet revised proposals did not deliver a major breakthrough after several days of talks between Iranian officials and Qatari mediators, leaving the geopolitical risk premium in place.

That backdrop could discourage traders from taking aggressive bearish positions in the USD. Together with worries over France’s mounting debt and political deadlock, it should help limit gains in EUR/USD. US JOLTS Job Openings are next on traders’ radar for direction, before Wednesday’s flash Eurozone CPI figures and US ISM Services PMI. Friday’s US Nonfarm Payrolls (NFP) report, however, remains the main focus.

EUR/USD: What does the 4-hour chart indicate?

Technical Analysis: Can EUR/USD Break Its Range?

Following the retreat from August’s monthly swing high, the sideways trading seen over roughly the past month could represent bearish consolidation. The near-term bias also remains negative because EUR/USD is trading below its 200-period Simple Moving Average (SMA) on the 4-hour chart.

Confirmation of the bearish outlook would require a decisive breach of range support around the 1.1100 round figure, paving the way for further losses. In contrast, the first upside hurdle is the 200-period SMA at 1.1267. A recovery above that barrier would be needed for buyers to ease downward pressure and establish a more constructive bias.

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

Euro: Frequently Asked Questions

Which countries use the Euro, and how widely is it traded?

Used by the 20 European Union countries in the Eurozone, the Euro ranks second only to the US Dollar among the world’s most traded currencies. Its share of global foreign exchange transactions stood at 31% in 2022, when average daily turnover exceeded $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%).

How does the ECB’s role affect the Euro?

Based in Frankfurt, Germany, the European Central Bank (ECB) serves as the Eurozone’s reserve bank, setting interest rates and conducting monetary policy. Maintaining price stability is its principal mandate, whether through controlling inflation or supporting growth. Interest rate increases and cuts are its main policy instrument. The Euro generally benefits when rates are relatively high or markets anticipate higher rates; the reverse also applies. Monetary policy is decided at eight meetings each year by the ECB Governing Council. The decision-makers comprise the heads of the Eurozone’s national banks and six permanent members, among them ECB President Christine Lagarde.

Why do inflation figures matter for the Euro?

For the Euro, a key economic measure is Eurozone inflation, tracked through the Harmonised Index of Consumer Prices (HICP). An increase in inflation beyond expectations, particularly above the ECB’s 2% target, requires the central bank to raise interest rates to regain control of prices. When interest rates are relatively high compared with those in other economies, the Euro typically gains, as global investors find the region a more attractive destination for their funds.

Which economic indicators can move the Euro?

The Euro can respond to economic releases because they provide a measure of the economy’s 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 more foreign investment and potentially prompting the ECB to raise interest rates, which would directly strengthen the currency. Weak economic readings, by contrast, are likely to weigh on the Euro. Particular attention goes to figures from Germany, France, Italy and Spain, the euro area’s four largest economies, which together represent 75% of the Eurozone’s economy.

Why is the Trade Balance important for the Euro?

The Trade Balance is another release that matters for the Euro. Over a specified period, it captures the gap between a country’s export earnings and its spending on imports. Strong overseas demand for a country’s exports creates additional demand for its currency as foreign buyers seek to pay for those goods, lifting its value. A positive net Trade Balance therefore supports the currency, while a negative balance has the opposite effect.