Euro regains 1.1200 against weak USD as post-ECB rebound from YTD low continues

• Supported by several favourable factors, EUR/USD extends its advance into a third consecutive day.
• A softer USD and the ECB’s hawkish stance lend support to the Euro and the pair.
• Expectations of a Fed rate hike and geopolitical uncertainty may cushion the USD’s decline and restrain the pair’s upside.

EUR/USD pushes further above 1.1200 in Friday’s Asian session, with several supportive factors driving a third consecutive day of gains. The advance extends the previous day’s solid recovery from around 1.1100, its lowest level since May 2025.

Euro strength continues to reflect the European Central Bank's (ECB) hawkish stance, which signals that a December rate increase remains firmly on the table as surging energy costs heighten inflation risks. Adding support to EUR/USD, the US Dollar (USD) is extending its pullback from a two-week high as hopes of Middle East diplomacy and a sharp fall in US bond yields weigh on the currency.

Efforts to revive peace talks have included a direct letter from US Vice President JD Vance to Mohsen Rezaei, secretary of Iran's Supreme National Security Council. Qatari mediators have also put forward a fresh draft agreement to Iran aimed at ending the war with the US and Israel. Despite these developments, intensifying hostilities between Houthis in Yemen and Saudi Arabia are keeping investors cautious.

Concerns over Middle East supply disruptions deepened after Iran's navy claimed on Thursday that four oil tankers had hit sea mines in the Strait of Hormuz. With uncertainty keeping crude oil prices elevated, inflation worries are strengthening expectations of a hawkish US Federal Reserve (Fed). That backdrop could cushion the USD’s losses and prevent any substantial EUR/USD advance.

Traders currently assign around a 75% probability to another increase in US borrowing costs in December, according to CME Group's FedWatch Tool. Thursday’s US economic releases reinforced those expectations: growth picked up to an annualised 3.4% in the July-September quarter, while September inflation remained above the central bank’s 2% target.

With these fundamentals favouring some buying of the USD on dips, it would be prudent to await strong follow-through buying before concluding that EUR/USD has established a near-term bottom and positioning for additional gains. For short-term opportunities, traders are turning their attention to the euro area’s initial third-quarter GDP growth estimate and consumer inflation data.

What Does the EUR/USD 4-hour Chart Show?

Can the Recovery Clear Technical Resistance?

On the 4-hour chart, the 100-period Exponential Moving Average (EMA) is halting EUR/USD’s recovery. Although the pair has repeatedly bounced from near the 1.1100 round number recently, its inability to regain this EMA points to continued short-term resistance. A sustained move above the 100-period EMA at 1.1211 is therefore required to relieve downward pressure and open the way for a more constructive recovery.

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