French debt concerns cap the euro’s modest rise as hopes for Iran diplomacy put the USD under pressure

EUR/USD finds buying support on Monday, with optimism over Iran diplomacy weighing on the USD.
The Euro gains further backing from the ECB’s hawkish stance, but the advance struggles to gather momentum.
With the US ISM PMI due later, traders await the final Eurozone PMIs for a fresh trigger.

Buying interest lifts EUR/USD modestly in Monday’s Asian session, but conflicting drivers leave the advance short of conviction. The pair is currently trading just above 1.1150.

Support for the single currency comes partly from the hawkish outlook of the European Central Bank (ECB). With surging energy costs raising inflation risks, a December rate increase remains firmly under consideration. The EUR/USD pair also benefits as optimism over Middle East diplomacy weighs on the safe-haven US Dollar (USD). Iranian negotiators reportedly met Qatari mediators on Sunday for a third consecutive day of talks aimed at securing an agreement to end the US-Israeli war on Iran. Separately, Iran has put forward a two-day (48-hour) plan to reopen the Strait of Hormuz, provided the US fulfils a series of conditions.

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

Despite describing talks with Tehran as productive, US President Donald Trump has left open the possibility of further military action after the November 3 midterm elections. Iran’s Supreme Leader, Mojtaba Khamenei, has also instructed his top military commanders to ready themselves for renewed confrontation with the US and Israel and broaden Tehran’s retaliation options. Meanwhile, renewed Ukrainian strikes on Russian oil refineries sustain the geopolitical risk premium. Together with expectations of a US Federal Reserve (Fed) rate hike, this should support the Greenback and limit any substantial gains in EUR/USD.

Traders assign around a 75% probability to another increase in US borrowing costs in December, according to the CME Group's FedWatch Tool. Thursday’s US macroeconomic releases strengthened those expectations by signalling continued economic resilience and persistent price pressures. EUR/USD could also face a ceiling from growing worries over France’s worsening debt levels and political deadlock ahead of next year’s election. For the next directional cue, traders await the final Manufacturing PMIs before the US ISM Manufacturing PMI release. Friday’s US Nonfarm Payrolls (NFP) report, however, will remain the market’s main focus.

What does the EUR/USD daily chart show?

Can EUR/USD Shake Off Its Near-Term Bearish Bias?

A firmly bearish near-term bias persists in EUR/USD, with the pair trading well below the 50-day Simple Moving Average (SMA) at 1.1379. Overhead, it also faces a cluster of resistance comprising the 23.6% Fibonacci retracement at 1.1247 and the 38.2% retracement at 1.1336. Beyond these levels, the 50.0% retracement at 1.1408 provides further resistance, followed by supply zones at 1.1480 (61.8%), 1.1582 (78.6%) and the cycle high near 1.1712. Should the decline continue, the next significant support lies at the structural anchor around 1.1104. A test of that level could draw buyers seeking to slow the ongoing bearish sequence.

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

Euro: Common Questions Answered

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

Used by the 20 European Union countries that form the Eurozone, the Euro ranks as the world’s second most traded currency after the US Dollar. Its share of all foreign exchange transactions stood at 31% in 2022, while average daily turnover exceeded $2.2 trillion. Among currency pairs, EUR/USD leads global trading with an estimated 30% of all transactions. It is followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What role does the ECB play in the Euro’s performance?

Based in Frankfurt, Germany, the European Central Bank (ECB) serves as the Eurozone’s central bank, determining interest rates and conducting monetary policy. Maintaining price stability is the ECB’s principal mandate, whether that requires curbing inflation or supporting growth. Adjusting interest rates upwards or downwards is its main policy instrument. The Euro generally benefits from relatively high interest rates or expectations of higher rates; the reverse also holds. 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.

Why do inflation readings matter for the Euro?

Measured through the Harmonised Index of Consumer Prices (HICP), Eurozone inflation is a key economic indicator for the Euro. An unexpectedly sharp increase in inflation, particularly above the ECB’s 2% target, requires the central bank to raise interest rates to bring price growth back under control. When interest rates exceed those of comparable economies, the Euro usually benefits, as global investors find the region more attractive for placing their funds.

Which economic releases can move the Euro?

By revealing the economy’s 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 drawing additional foreign 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. Particular importance attaches to figures from Germany, France, Italy and Spain, the euro area’s four largest economies. Together, they represent 75% of the Eurozone’s economy.

Why does the Trade Balance matter for the Euro?

The Trade Balance is another important release for the Euro. Over a specified period, it records 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 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.