The EUR/USD currency pair attracted buyers for the second consecutive day, rising to the 1.1225-1.1230 area during the Asian session on Friday, supported by a weaker US Dollar following an overnight slide in US bond yields and profit-taking on the USD [1]. Despite this, the pair remains confined within a range established since the beginning of the month, with a bearish technical setup and caution warranted for bullish traders [1]. The Relative Strength Index (RSI) stands at 50.4, indicating neutral momentum, while the MACD has turned modestly positive, suggesting a potential pause rather than a reversal [1]. Resistance is expected near 1.1280 and 1.1300, with a possible rally to 1.1355-1.1360 if these levels are breached, though the move up may be seen as a selling opportunity due to underlying USD strength [1]. On the downside, a break below 1.1200 could expose support at 1.1160, the lowest level since May 2025 [1].
Geopolitical tensions remain elevated, with President Donald Trump stating on Thursday that the US would refrain from resuming military strikes on Iran before the November 3 midterm elections, while productive discussions with Iran were ongoing [1][3]. This stance, combined with a well-received 30-year US bond auction and a pullback in bond yields, contributed to USD weakness and supported both EUR/USD and gold prices [1][3]. However, the risk premium persists due to the US-Iran standoff over Tehran's nuclear program, ongoing Middle East conflicts, and disruptions around the Strait of Hormuz [1][3]. US Vice President JD Vance emphasized that Iran must reduce its nuclear enrichment capacity to meet US demands, a position rejected by Iran’s Atomic Energy Chief Mohammad Eslami [3].
Market participants remain cautious, as the US Federal Reserve's hawkish tilt is expected to limit deeper USD losses and cap EUR/USD gains [1][3]. UOB Group analysts anticipate two additional Fed rate hikes in December 2026 and Q1 2027, with no back-to-back hike expected at the October FOMC meeting, which is less than a week before the midterm elections [3]. They also highlight ongoing inflation risks from higher energy prices, trade tariffs, and AI-related factors [3].
In the broader currency market, the Euro was the strongest against the Japanese Yen, gaining 0.23% on the day [2]. The EUR/JPY cross traded around 177.40, testing the 177.50 barrier near the nine-day EMA, but retained a bearish near-term bias as it remained below both the nine- and 50-period EMAs [2]. The 14-day RSI for EUR/JPY was at 35.8, just above oversold territory, indicating persistent but moderating downside pressure [2]. ECB's Moulin noted that inflation is "100% energy" driven and downplayed second-round effects, signaling a mildly dovish stance and suggesting limited urgency for aggressive tightening [2]. However, Moulin also warned that the geopolitical shock is transmitting into a financial shock, introducing a cautious tone [2].
CONCLUSION
The EUR/USD pair is holding modest gains amid a softer USD, but remains in a bearish consolidation phase due to persistent geopolitical risks and the Federal Reserve's hawkish outlook. While technical indicators suggest a potential pause in the downtrend, significant resistance levels and ongoing policy uncertainty limit the upside. Market sentiment remains cautious, with traders closely monitoring geopolitical developments and upcoming US economic data for further direction.