EUR/USD outlook: Weak economic data and fragile political situation likely to cap recovery

EUR/USD

EUR/USD stays constructive on Tuesday after recovering from Monday’s gap-lower opening and dip below 1.12 handle, reinforced by 10DMA, but so far lacks strength for fresh attack at falling 20DMA (1.1257) which capped Friday’s rally.

Technical picture remains predominantly bearish on daily chart as 14-d momentum holds in the negative territory since Sep 9 and MAs remain in bearish configuration (55/100 DMAs are about to form a bear cross.

This suggests that the downside remains at increased risk, with limited correction from 1.1112 (Oct 14 low, the lowest since early Apr 2025), where 200 WMA contained larger downtrend, likely to precede fresh push lower.

On the other hand, political developments in Europe, particularly in France, became Euro’s dominant driver and initial direction signals are likely to come from that side.

The single currency showed limited positive impact from (currently) calmer situation in France, as the latest economic data from the EU add pressure on Euro.

Eurozone current account surplus contracted significantly in Aug (8.7B from 27.2B in July) and economic sentiment also weakened (Oct 18.5 vs Sep 25.8), with widening spread between French 10-y bonds against the major bloc’s economies, adding to negative signals.

Caution on loss of 1.1200 support that may risk renewed attack at 1.1130/20 supports (50% retracement of 1.0177/1.2082 uptrend / 200WMA) break of which to signal bearish continuation.

Conversely, lift above 20DMA would provide relief, but verification of bullish signal would require extension above 1.1320/40 zone (former low of Jun 24 / Fibo 38.2% of 1.1711/1.1112).

Res: 1.1235; 1.1257; 1.1311; 1.1340.
Sup: 1.1200; 1.1145; 1.1112; 1.1065.