Forex · 21 October 2026
EUR/USD Holds Range Ahead of Twin Central Bank Decisions
The pair trades near **1.1250** as French budget stress and weak sentiment weigh on the euro before next week's ECB and Fed meetings.
Ultimo Research
The EUR/USD pair is trading around 1.1225 in Wednesday's European session, consolidating within the 1.1100 to 1.1300 range that has contained the market since early October. The euro remains under pressure from widening French sovereign debt spreads as the lower house votes on the revenue side of the proposed 2027 budget. Both left and right parties have attached numerous amendments to the original bill, meaning markets are unlikely to welcome the outcome even if it passes. The budget bouncing between chambers into early December appears to be the base case, keeping political risk elevated.
Economic sentiment from the eurozone disappointed on Tuesday. The ZEW index fell to 18.5 in October from 25.8 the prior month, well short of the 24.2 forecast. The weaker outlook for regional growth argues against further European Central Bank tightening, which reduces one of the euro's few supports against a Federal Reserve that continues to raise rates. Current account data added to the negative picture, with the August surplus contracting sharply to €8.7 billion from €27.2 billion in July.
French sovereign debt faces additional scrutiny this week with a ratings review on Friday. The agency could play catch-up with others in cutting France to a single A-rated issuer. The move is expected and investors remain underweight French debt, but the loss of the final AA rating from the major three agencies still carries the risk of forced selling.
What the calendar says
Next week brings decisions from both sides of the pair. The European Central Bank announces its rate decision on 29 October at 12:15 UTC, with the deposit rate expected to hold at 2.50%. Some forecasts look for one more hike in December to a 2.75% peak, which would still leave the deposit rate almost a point below September's 3.7% inflation print. ECB President Lagarde speaks at 16:30 UTC on Wednesday this week, with further remarks from Chief Economist Lane, Bundesbank President Nagel and Executive Board member Cipollone earlier in the day.
The Federal Reserve follows hours later on 28 October at 18:00 UTC. With eurozone sentiment deteriorating while the Fed maintains its tightening bias, the policy divergence remains a headwind for the euro. Friday brings Purchasing Managers Index figures for October at 08:00 UTC, forecast at 52.8 for both factories and services, with US PMIs later the same day allowing direct comparison across both sides of the pair. Check the full schedule on our economic calendar.
Technical picture
The hourly chart shows the pair trading just below 1.12250 after recovering from Monday's gap lower and a test of the 1.12200 level reinforced by the 10-day moving average. The 20-day average near 1.12257 has capped rallies five times this month, most recently on Friday. Daily momentum sits at 39.6 on the 14-period relative strength index, in bearish territory but above oversold thresholds.
The pair remains below both the 50-day exponential moving average just under 1.1400 and the 200-day near 1.1500 since mid-September. Key moving averages are in bearish configuration with the 55- and 100-day averages about to form a bear cross. Support lies at the 14 October low of 1.1185, followed by the 1.1130 to 1.1120 zone that marks the 50 per cent retracement of the broader uptrend. A break there would signal bearish continuation. On the upside, a clear move above the 20-day average would provide relief, but sustained recovery requires extension above 1.1320 to 1.1340.
This material is provided for information purposes only and does not constitute investment advice, a recommendation or a solicitation to trade. Trading on margin carries a high level of risk. Please read our full Risk Disclosure Statement.