The euro has extended its losing streak against the US dollar, with EUR/USD slipping below 1.1200 and trading near 1.1140 as traders brace for this week’s Federal Reserve and European Central Bank decisions. Two forces are pulling in the same direction: a firmer dollar and renewed concern about France’s public finances.
Why the euro is under pressure
1. French fiscal risk. Worries about France’s budget outlook have pushed French government bond yields higher, reviving fears of stress within the eurozone bond market. When investors demand a bigger premium to hold a large member state’s debt, the euro usually suffers.
2. A stronger dollar. The US Dollar Index has climbed to two-week highs above 102.00, supported by expectations that the Fed will keep a hawkish stance and by safe-haven demand linked to Middle East tensions.
3. Policy uncertainty. The ECB is expected to hold rates on Thursday. Some analysts think a December hike is possible if inflation stays high, but the bank may be cautious while French bond markets are unsettled.
Key levels and scenarios
- Resistance: 1.1200 is now the first hurdle. A recovery back above it would ease the immediate bearish pressure.
- Support: The 1.1100 area is the next psychological level traders will watch if the selling continues.
- Bullish scenario: A dovish-sounding Fed combined with a hawkish ECB could trigger a short-covering bounce.
- Bearish scenario: A Fed that clearly signals a December hike, together with fresh French bond stress, could push the pair lower.
What to watch
- The spread between French and German 10-year bond yields
- Fed statement and press conference (Wednesday)
- ECB decision and Lagarde’s tone on December (Thursday)
- Eurozone inflation and growth data later in the week
Bottom line: EUR/USD is being driven by both the dollar side and a euro-specific risk. Until French bond worries calm down, rallies in the pair may struggle to hold.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice. Trading forex and CFDs carries a high level of risk and may not be suitable for all investors. Market levels quoted are approximate at the time of writing.