EUR/USD registers slight increases near 1.1470 during the early hours of Tuesday’s Asian session. Political risks in Germany have escalated after the results of two more unsatisfactory state elections. Fed’s Musalem indicated that additional rate hikes are probably necessary to address inflationary pressures. The EUR/USD pair is experiencing slight increases, hovering around 1.1470 in the early hours of trading on Tuesday in Asia. Middle East diplomacy hopes to provide some support to the riskier assets such as the Euro against the US Dollar. Traders are poised for the upcoming remarks from the Federal Reserve on Tuesday, seeking new momentum. President Masoud Pezeshkian is set to head an Iranian delegation at the United Nations General Assembly in New York on Tuesday, coinciding with renewed optimism for a diplomatic resolution to the Middle East conflict, according to source.
Market participants will pay keen attention to the geopolitical dynamics related to the discussions between the United States and Iran. US President Donald Trump indicated that he would “probably” be receptive to a meeting with his Iranian counterpart during the UN General Assembly proceedings. Conversely, political risks in Germany may exert downward pressure on the shared currency. The far-right Alternative for Germany secured the top position in state elections held in northeastern Germany on Sunday. This outcome marked a significant setback for Chancellor Friedrich Merz’s conservative party, which experienced its most severe regional election defeat in postwar Germany, thereby putting his hold on power in jeopardy. Hawkish remarks from officials at the US Federal Reserve could bolster the Greenback and serve as a headwind for the major pair.
Chicago Fed President Austan Goolsbee stated on Monday that US inflation may have transcended the tariff and energy price shocks experienced over the past 18 months and is now being influenced by robust demand, which could necessitate a more rapid pace of Fed rate increases. Meanwhile, St. Louis Fed President Alberto Musalem stated that the US central bank will likely need to hike interest rates further to lower inflation resulting from strong demand as well as a commodity price shock that has moved beyond oil. Analysts warn that “the latest political and fiscal developments in European could contribute to undermining confidence in the Euro in the near-term.” They highlight that “there is a higher risk of political instability in Germany after two more disappointing state election results for the ruling parties over the weekend,” a backdrop that they believe could further weigh on investor sentiment toward the single currency.
In the daily chart, EUR/USD maintains a bearish near-term outlook as the spot remains below the 100-day simple moving average and the Bollinger middle band. Price is positioned marginally above the lower Bollinger band, indicating that the pair is nearing the lower boundary of its recent volatility range. Meanwhile, the Relative Strength Index at approximately 34.5 remains just above the oversold threshold, suggesting ongoing downside pressure that is notable but not yet at extreme levels. On the topside, initial resistance emerges at the 100-day SMA at 1.1545, followed by the Bollinger SMA centerline around 1.1575. The upper Bollinger band near 1.1705 serves as a more formidable barrier should a corrective bounce materialise. On the downside, the lower Bollinger band at 1.1445 provides immediate support; a decisive break below this level would facilitate an extension of the current bearish phase.
