Below 1.1200: Euro stays under pressure as USD steadies ahead of US midterm elections

Monday’s strong data support the USD, keeping EUR/USD bulls under pressure.
France’s debt crisis limits the Euro’s upside, while Fed rate-hike expectations lend further support to the dollar.
Ahead of key macroeconomic releases, US midterm election results could trigger volatility.

EUR/USD trades just below 1.1200. The pair has a slight downward bias in Tuesday’s Asian session, threatening to extend the previous day’s modest retreat from the 1.1235 area, a one-and-a-half-week high. Selling has yet to gather momentum, however, as traders appear cautious ahead of the US midterm elections.

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

A Republican sweep would represent the bigger market surprise, as prediction markets heavily favour a Democratic victory in the House. Such an outcome could push US Treasury yields and the US Dollar (USD) higher. Regardless, the results may generate short-term volatility and give EUR/USD fresh direction. For now, the dollar appears supported by Monday’s stronger-than-forecast US economic data and expectations of a hawkish US Federal Reserve (Fed).

At 55.5 in October 2026, the Institute for Supply Management’s (ISM) Manufacturing PMI recorded its 10th consecutive month of expansion, up from 54.5 a month earlier. Meanwhile, traders assign an over 70% probability to a December increase in US borrowing costs, according to the CME Group’s FedWatch Tool. These factors support the USD. Hopes for diplomatic progress with Iran could nevertheless restrain its gains and lend support to EUR/USD.

On Monday, US President Donald Trump said Iran wanted a deal to end the war and that an agreement was possible. Iranian Foreign Minister Abbas Araqchi also described consultations through mediators as very intensive. Despite revised proposals, however, several days of talks between Iranian officials and Qatari mediators produced no major breakthrough. The geopolitical risk premium therefore remains in place.

Against this backdrop, traders may be reluctant to take aggressive bearish positions on the USD. Combined with concerns over France’s worsening debt burden and political deadlock, this should help limit EUR/USD’s upside. The next potential catalyst is US JOLTS Job Openings, followed on Wednesday by the flash Eurozone CPI report and US ISM Services PMI. Friday’s US Nonfarm Payrolls (NFP) report remains the main focus.

4-hour EUR/USD chart

200-Period SMA Keeps EUR/USD Under Pressure

EUR/USD remains below the 200-period Simple Moving Average (SMA) on the 4-hour chart, preserving a negative near-term bias. Following the decline from August’s monthly swing high, the sideways trading seen over roughly the past month could be viewed as a bearish consolidation phase.

Near 1.1100, the round-number level marking support for the trading range, a decisive downside break would be required to confirm the bearish outlook and pave the way for further losses. The first resistance on a recovery is the 200-period SMA at 1.1267. Reclaiming that barrier would be necessary for bulls to ease downward pressure and establish a more constructive bias.

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

Euro: Key Questions Answered

20 EU Countries: Where Is the Euro Used?

The Euro serves as the currency of the 20 European Union countries in the Eurozone. Globally, only the US Dollar is traded more heavily. The Euro represented 31% of all foreign exchange transactions 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%).

ECB Policy: What Does It Mean for the Euro?

Based in Frankfurt, Germany, the European Central Bank (ECB) serves as the Eurozone’s reserve bank, setting interest rates and directing monetary policy. Price stability is its principal mandate, pursued by containing inflation or supporting growth. Interest-rate increases and cuts are its main policy instrument. Higher rates relative to other economies, or expectations of 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.

2% Inflation Target: Why Does It Matter for the Euro?

Measured by the Harmonized Index of Consumer Prices (HICP), Eurozone inflation is a key economic gauge for the Euro. An unexpectedly strong rise in inflation, particularly above the ECB’s 2% target, requires the central bank to increase interest rates to regain control of prices. When the region’s interest rates are relatively high compared with those elsewhere, the Euro usually benefits. The higher rates make the region a more attractive destination for global investors’ funds.

75% of the Eurozone Economy: Which Data Drive the Euro?

The Euro can respond to economic releases because they indicate the economy’s health. GDP, Manufacturing and Services PMIs, employment figures and consumer sentiment surveys can each shape the single currency’s direction. Economic strength supports the Euro by drawing in foreign investment and potentially encouraging the ECB to raise interest rates, which would directly strengthen the currency. Weak economic figures, by contrast, are likely to weigh on the Euro. Germany, France, Italy and Spain merit particular attention. As the euro area’s four largest economies, they represent 75% of the Eurozone economy, making their economic releases especially important.

Trade Balance: How Does It Shape the Euro?

The Trade Balance is another key release for the Euro, showing the gap between a country’s export earnings and its spending on imports during a given period. 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.