EUR/USD Dips as Dollar Strengthens, French Unrest Dampens Mood

The EUR/USD currency pair closed the week on the defensive, slipping lower as the US Dollar (USD) regained momentum following a rebound in US Treasury yields. After reaching three-year lows in the wake of the Federal Reserve’s 25 basis-point (bps) rate cut, the Greenback clawed back losses, with the US Dollar Index (DXY) rising 0.31% to 97.66 late Friday. 

The move reflected a combination of cautious tones from Fed officials and renewed safe-haven demand, while political unrest in France added additional headwinds for the Euro.

At the close of the North American session, the EUR/USD traded at 1.1747, down 0.32% on the day. Market participants pointed to the twin drivers of stronger yields and European political risk as the catalysts that broke the pair’s bullish momentum. Brian Elmers of LFtrade shares a detailed analysis of the subject in his latest piece.

US Data Lends Support to the Dollar

Beyond Fed rhetoric, the US macroeconomic docket provided tailwinds for the Greenback.

• Weekly Initial Jobless Claims fell sharply to 231K, beating forecasts of 240K and easing from the previous week’s upwardly revised 264K.
  
• The Philadelphia Fed Manufacturing Index surprised on the upside, rebounding to 23.2 in September from -0.3 in August, far above the 2.3 forecast. The data signaled a pickup in manufacturing activity, bolstering optimism about US economic resilience.

This combination of stronger-than-expected figures and cautious Fed commentary reinforced the Dollar’s recovery after its midweek slide.

French Protests Add Political Pressure on the Euro

Across the Atlantic, the Euro (EUR) came under pressure as domestic political developments weighed on sentiment. Mass protests erupted across France’s major cities, with hundreds of thousands of demonstrators voicing opposition to spending cuts introduced under the previous Prime Minister, François Bayrou.

Newly appointed Prime Minister Sebastien Lecomu faces mounting challenges in addressing the backlash, while President Emmanuel Macron must navigate growing dissatisfaction over fiscal reforms. The unrest threatens to undermine investor confidence in French stability, adding to existing structural concerns about the Eurozone economy.

This political backdrop amplified the Euro’s vulnerability against the resurgent US Dollar, pushing EUR/USD below the 1.1750 threshold.

Daily Market Movers and Investor Outlook

Friday’s price action illustrated how sensitive EUR/USD remains to both US fundamentals and European political risk.

• US Dollar Index (DXY): rose to 97.66, reflecting a rebound in Treasury yields.
• Futures pricing: signaled strong odds of additional Fed easing, though investors are wary of mixed signals from policymakers.
• French unrest: injected a layer of political risk premium into the Euro, curbing its upside potential.

Next week’s economic calendar could bring fresh volatility, with key releases including:

• S&P Global Flash PMIs (manufacturing and services)
• Durable Goods Orders
• US GDP data
• Initial Jobless Claims
• Core PCE Price Index: the Fed’s preferred inflation gauge

In parallel, a flurry of Fed speakers is set to provide further guidance, which could sway expectations for upcoming meetings.

Technical Outlook: EUR/USD Still Holds a Bullish Bias

From a technical analysis perspective, EUR/USD showed signs of exhaustion after recent gains, with an evening star candlestick pattern emerging. This suggested short-term weakness, yet the broader structure remains constructive.

• Support levels: The pair has immediate support at 1.1700, with a deeper test possible toward the September 11 low of 1.1659. A more decisive break would expose the 100-day Simple Moving Average (SMA) and the August 27 swing low near 1.1560–1.1574.

• Resistance levels: On the upside, reclaiming 1.1800 would open the path to 1.1850, with scope to retest the year-to-date high at 1.1918.
• Momentum: The Relative Strength Index (RSI) remains comfortably below overbought territory, supporting the case for a continued broader uptrend despite near-term pullbacks.

This technical setup suggests that while the Dollar’s rebound has capped Euro strength in the short run, the longer-term bullish bias remains intact as long as EUR/USD holds above key support levels.

Conclusion

The EUR/USD pair ended the week lower as the Dollar rebound overshadowed the Euro’s prior momentum. A combination of rising US Treasury yields, mixed but largely neutral Fed commentary, and French political unrest pressured the pair into retreat.

While the broader Euro uptrend remains in play, near-term risks are skewed toward further Dollar strength, especially if upcoming US data prints firm and Fed officials reiterate their cautious stance. On the European side, political instability in France could remain a drag, leaving the single currency vulnerable to renewed bouts of volatility.

For traders, next week’s packed US economic calendar and evolving Fed policy signals will be pivotal in determining whether EUR/USD can reclaim higher ground, or if the Greenback’s rebound gathers further steam.