Euro weakens below 1.1250 as French protests and fiscal risks weigh

The EUR/USD pair loses ground to near 1.1225 during the early Asian trading hours on Wednesday. The Euro (EUR) softens against the US Dollar (USD) as French protests and fiscal strains keep traders cautious. European Central Bank (ECB) policymakers are set to speak later in the day, including President Christine Lagarde, Philip Lane, Joachim Nagel and Piero Cipollone.

CNBC reported that a French official will deploy some military forces to help maintain order during a fresh wave of protests expected this weekend. French Prime Minister Sébastien Lecornu also said there would be fresh curfews “where the situation requires it.”

"The worries in France are not going away anytime soon," said Tommy von Brömsen, FX strategist at Handelsbanken. "The bearish view on France will stay for a while longer, and there's much more euro weakness to be priced in,” Tommy added.

Across the pond, markets calibrate the Federal Reserve’s (Fed) next move after it hiked rates for the first time since 2023 in September. Fed Chairman Kevin Warsh signaled that he wouldn’t “prejudge” meetings, while most Fed policymakers have projected at least one more increase this year.

Traders are now pricing in around a 16.1% probability of another quarter-point increase at the Fed’s October 27-28 meeting, according to the CME FedWatch tool. They price in an over 90% chance of a rate hike in the December policy meeting.

Euro underperforms as Eurozone bond tensions persist despite Germany survey uptick

Strategists at Scotiabank note that the Euro is underperforming on the day, with the EUR “lagging its major currency peers” as ongoing strains in Eurozone government bond markets weigh on sentiment. They highlight that the “10Y OAT/Bund spread remains elevate, near 150bps, reflecting social/fiscal tensions in France,” underscoring the persistent risk premium embedded in French debt.

On the data front, Scotiabank points to the Germany October ZEW Survey, which “reflected a solid improvement in the (still soft) Current Situation reading (-35.9 versus -44.5 expected and -47.1 in September) but some softening in the Expectations component (to 28.1, from 33).” The bank cautions that this “survey of financial professionals tends to be heavily weighted by market, rather than economic, developments” but concludes that it “generally indicates the economy remains in ‘slow recovery’ mode,” limiting the scope for a more decisive Euro rebound.

Warsh cautious on crisis scars but upbeat on investment surge and AI

Fed Chair Warsh delivered a moderately constructive tone, with the FXS Speechtracker score at 5.6/10, slightly softer relative to the historical average of 6.1/10 and signaling only modest incremental information for markets. The admission of being “over-scarred” by the Global Financial Crisis underscores a persistent bias toward vigilance on financial stability, even as Warsh highlights structural growth, an investment surge, and the upside role of AI in data and policy confidence, while refusing to pre-commit on October and December decisions. Overall, the speech balances optimism on the real economy and technology with a clear reluctance to prejudge the policy path, leaving Dollar traders focused on upcoming FOMC meetings as the “crystalizing moment.”

The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-hawkish level of 127.51, confirming that the speech did not materially shift the perceived policy stance despite the slightly lower FXS Speechtracker score. With the index firmly above 100, the Fed remains in hawkish territory, and the combination of structural growth, investment surge, and AI-driven confidence in data keeps Dollar sentiment supported even without an incremental hawkish push.

Technical Analysis: EUR/USD keeps a bearish vibe below the 100-day SMA

In the daily chart, EUR/USD retains a bearish near-term bias as spot holds beneath the 100-day simple moving average (SMA) and the 20-day Bollinger middle band. Price is also below the upper Bollinger band, reinforcing a downside-skewed consolidation within the envelope, while the Relative Strength Index (14) at about 40 stays below the neutral 50 line, hinting at subdued bullish momentum.

On the topside, initial resistance emerges at the 20-day Bollinger SMA around 1.1250, followed by the upper band near 1.1392 and the more significant 100-day SMA at 1.1460, which caps the broader recovery attempts. On the downside, the lower Bollinger band at roughly 1.1115 forms the next notable support, and a sustained break below this floor would likely open the way for a deeper slide toward previous cycle lows.