EUR/USD is experiencing upward momentum, approaching the 1.1240 mark during the early hours of Wednesday’s Asian session. US midterm elections will take center stage on Wednesday. ECB’s Nagel says the central bank will probably have to hike in December. The EUR/USD pair advances to approximately 1.1240 in the early hours of trading on Wednesday in Asia. US midterm election uncertainty exerts some selling pressure on the US Dollar against the Euro. Market participants will pay close attention to the election outcomes in anticipation of the forthcoming US employment figures for September, scheduled for release later this week. Americans are participating in midterm elections that will provide an assessment of US President Donald Trump’s second term. The race for control of Congress remains open, with key contests still undecided.
In the US House, media projections indicate winners in approximately two dozen of the chamber’s 435 seats, none of which were anticipated to be highly competitive races. In the US Senate, Democrats have secured victories in the initial seven of the 35 contested seats on Tuesday, highlighted by a win from US Senator Jon Ossoff in Georgia, as reported by US media projections. Despite these early successes, the party still needs to secure a net gain of four seats to achieve control of the Senate. Hawkish comments from European Central Bank policymakers also lift the shared currency. ECB Governing Council member Joachim Nagel said on Tuesday that the central bank will probably increase borrowing costs next month due to the worsening outlook for inflation. The ECB maintained the key interest rates last week, following two increases since the onset of the Iran war. Several officials have indicated additional hikes may be necessary.
Economists anticipate a concluding adjustment in rates next month; however, market expectations suggest that tightening will persist beyond this point, extending into 2027. Analysts note that the Euro is trading modestly softer against the Dollar in subdued conditions, with the move framed by ongoing hawkish messaging from the ECB. They highlight comments from ECB Governing Council member Radev, who stressed that the October rate pause “does not mean that tightening is over,” thereby “keeping the door open for a December hike.” Scotiabank points out that “Dec OIS are pricing in 22bps of tightening risk,” underscoring that markets still see a meaningful chance of further policy action. On the commodity side, Scotiabank observes that “despite the drop in crude oil prices this week, the European energy focus remains on natgas/power where prices have eased but remain significantly above even the most pessimistic ECB forecasts.” This persistent elevation in gas and power costs continues to shape the inflation backdrop in the Eurozone, even as headline energy markets appear calmer.
In terms of fiscal developments, Scotiabank also flags that “France reported its September YTD budget balance of EUR159.2bn, in line with expectations,” suggesting no major surprise from one of the Eurozone’s key sovereign borrowers. ECB’s Nagel delivers a stronger-than-usual hawkish signal, with the 8.2/10 FXS Speechtracker score notably above the 7/10 historic average, reinforcing expectations for tighter policy. The explicit remark that “a rate hike in December is very likely to be necessary” and the warning that inflationary pressures are approaching an adverse scenario underline a clear bias toward further tightening, supportive of the Euro on rate-differential grounds. Nagel’s emphasis on preventing an energy price spike from morphing into broad-based inflation, while stressing that France’s budget issues are not a task for monetary policy, keeps the focus squarely on price stability. This combination of inflation vigilance and confidence in fiscal containment indicates a constrained tolerance for unexpected inflation increases, thereby raising the likelihood of further interest rate hikes and supporting the Euro’s strength against the Dollar and other major currencies in the short term.
In the daily chart, EUR/USD exhibits a bearish near-term bias, as the spot remains constrained below the 100-day Simple Moving Average. Price holds just above the 20-day Bollinger Bands middle line, suggesting some underlying but fragile demand, while the upper band at 1.1254 marks immediate overhead resistance. The Relative Strength Index at 46 stays below the 50 line, hinting that recovery attempts lack strong momentum. On the topside, initial resistance is located at the Bollinger upper band around 1.1255, ahead of the more meaningful barrier at the 100-day SMA near 1.1420, where sellers are likely to defend the broader downtrend. On the downside, the first support level aligns with the Bollinger middle band at 1.1195, with a deeper cushion at the lower band near 1.1135; a daily close below this latter floor would reinforce the bearish structure and open the way to further losses.
