Above 1.1150: EUR/USD Price Forecast stays bearish below 100-day SMA despite gains

1.1160 is in sight as EUR/USD strengthens in early European trading on Monday.
Below the 100-day SMA, the pair’s outlook remains bearish.
1.1190 marks the first resistance, while 1.1125 is the initial support to monitor.

1.1160 is the approximate trading level for EUR/USD as it posts gains early in Monday’s European session. The Euro (EUR) draws some support against the US Dollar (USD) from the European Central Bank’s (ECB) hawkish stance.

After leaving rates unchanged in October, the ECB is assessing indicators to determine whether a rate increase next month would be justified, President Christine Lagarde said last week. "We will have many indicators between now and December that will really help us determine whether a hike is necessary," said Lagarde.

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

An improving US labour market, however, could support the Greenback and weigh on the major currency pair. October employment rose by 165,000, exceeding estimates and the 60,000 jobs added in September. The unemployment rate also declined to 4.1% in October. Together, the data have strengthened expectations of continued labour-market resilience, keeping the Federal Reserve (Fed) on course for a December interest rate rise.

Euro under pressure as cash flows favour the Dollar

Even a “large US tech sell-off is still not enough to prompt much EUR/USD buying at all,” ING analysts observe, describing the Euro’s recent trading as “a rather unimpressive performance,”. Although “the European buy-side is running low hedge ratios on its US investments,” they note that anticipated demand for the single currency has not emerged.

ING attributes this to investors’ preference for Dollar cash: “global investors are more than happy to leave their cash in dollars for the time being. In other words, we are seeing a rotation into cash and not out of the dollar.” Supporting that preference, the analysts add, is “the return to more familiar correlations, where US Treasuries are now performing their safe haven role.”

For the outlook, ING’s view is that, “barring a soft US jobs report today, expect EUR/USD to consolidate not far from 1.12,”. The Eurozone calendar also brings a focus on “ECB Chief Economist Philip Lane at 10:30 CET.” Regarding monetary policy, the analysts note that “the market still prices 18bp of ECB hikes in December and that should remain sticky unless we see a much deeper equity correction.”

6.2/10: Lagarde’s hawkish tone amid tariff and inflation risks

A 6.2/10 reading on FXS Speechtracker put ECB President Lagarde’s speech modestly above the historical baseline of 5.6/10, indicating a slightly firmer policy tone. Her message that it is “still necessary to apply tools to avoid inflation running away”, alongside plans to assess numerous indicators before December, suggests a hawkish bias for the Euro. That remains the case despite her acknowledgement of the challenge of separating supply shocks from demand shocks.

Persistent external risks could keep Euro-area price pressures elevated. These were highlighted by comments that US tariffs are unlikely to be reconsidered soon, although US mid-term votes could ultimately influence trade policy. An energy shock and AI were described as opposing forces shaping the current environment, underlining policy uncertainty. Nevertheless, the commitment to counter inflation implies downside risks for the Dollar against the Euro should markets price in comparatively tighter ECB policy.

Technical Analysis: 100-day SMA caps EUR/USD’s bearish outlook

Trading below both the 20-day Bollinger simple moving average and the 100-day simple moving average (SMA), EUR/USD retains a bearish short-term bias on the daily chart. Those levels suggest the broader trend remains capped. The pair also sits beneath the upper Bollinger band, consistent with limited rebound attempts. At around 41, the Relative Strength Index (RSI) signals mildly negative momentum, but not oversold conditions.

The 20-day Bollinger SMA, around 1.1190, provides the first upside resistance before the upper Bollinger band near 1.1260. Beyond that, resistance lies at the 24 June low of 1.1325, followed by the 100-day SMA at 1.1412.

Near 1.1125, the lower Bollinger band provides immediate support. A decisive breach would clear a path towards the psychological 1.1100 level and then 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

The Euro: which countries use it?

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 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 are EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

The ECB: its role and influence on 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 core mandate, whether through containing inflation or supporting growth. Raising and lowering interest rates is its main policy instrument. Higher relative interest rates, or expectations of rate increases, generally support the Euro; the reverse also applies. Monetary policy is decided by the ECB Governing Council, which meets eight times a year. The decision-makers comprise the heads of Eurozone national banks and six permanent members, among them ECB President Christine Lagarde.

Inflation data: implications for the Euro

The Harmonised Index of Consumer Prices (HICP), which measures Eurozone inflation, is a key economic indicator for the Euro. Inflation above expectations, particularly when it exceeds the ECB’s 2% target, requires the central bank to raise interest rates to regain control. When interest rates are higher than those of its counterparts, the Euro usually benefits. Those rates increase the region’s appeal to global investors seeking a place to hold their money.

Economic releases: what drives the Euro’s response?

By measuring economic health, data releases can move the Euro. GDP, Manufacturing and Services PMIs, employment figures and consumer sentiment surveys are among the indicators that can shape the single currency’s direction. Economic strength supports the Euro by attracting more overseas investment. It may also prompt the ECB to raise interest rates, directly strengthening the currency. Weak economic readings, by contrast, are likely to weigh on the Euro. Germany, France, Italy and Spain together represent 75% of the Eurozone economy. Releases from these four largest euro-area economies therefore carry particular significance.

Trade Balance: why it matters for the Euro

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