EUR/USD traded higher on Tuesday, rising 0.41% to around 1.1200, as a pullback in the US Dollar provided some relief for the Euro. Despite this modest recovery, the currency pair remains near 17-month lows, pressured by ongoing fiscal and political concerns in France, which have contributed to a risk premium on the Euro. Analysts at ING estimate that EUR/USD is currently about 1.5% undervalued relative to short-term fundamentals, attributing this to a moderate France-related risk premium that could expand if French bonds continue to lose value. However, ING notes that their baseline does not expect a significant widening of the OAT-Bund 10-year spread, especially if the French budget is passed via decree, which may help contain the spread below 150-160 basis points [1].
ING highlights that the environment remains challenging for Euro bulls, with few domestic drivers for the currency this week aside from several ECB appearances, including President Christine Lagarde. Market expectations are already fully priced for a December ECB rate hike, leaving little room for additional hawkish support, and an October move is considered unlikely. ING warns that a test of 1.1100 remains a risk for EUR/USD, even though some stabilization is expected in the near term. The bank has revised its EUR/USD forecast lower to 1.13 for both Q4 2026 and Q1 2027. Societe Generale reported an overnight EUR/USD trading range of 1.1186 to 1.1217 [1].
From a technical perspective, EUR/USD maintains a bearish near-term bias, trading well below the 50-day, 100-day, and 200-day Simple Moving Averages. The Relative Strength Index (RSI) near 29 indicates oversold conditions, while the MACD remains negative and the ADX above 50 signals a strong prevailing downtrend. Despite stretched momentum, there is room for a corrective bounce. Immediate resistance is at the 1.1200 psychological level, followed by 1.1350, with further resistance at the 100-day SMA (1.1483) and 50-day SMA (1.1489). The 200-day SMA at 1.1591 and the 1.1700 level are additional hurdles. On the downside, initial support is at 1.1150, with a break below this level potentially opening the door to the 1.1000 mark [1].
CONCLUSION
EUR/USD remains under pressure due to French political and fiscal concerns, with technical indicators pointing to a strong downtrend despite a modest recovery. Analysts see limited upside catalysts in the near term, and risks remain skewed to the downside unless market sentiment improves or French bond spreads stabilize.