EUR/USD is recovering on Tuesday but still lacks the strength to challenge the falling 20-day average. Weak eurozone data and political developments in France are likely to cap the rebound, and the technical picture remains predominantly bearish.
EUR/USD stays constructive on Tuesday after recovering from Monday's gap-lower opening and a dip below the 1.12 handle. The 10DMA reinforced the recovery, but the pair so far lacks strength for a fresh attack at the falling 20DMA (1.1257), which capped Friday's rally.
Bearish technicals keep downside risk elevated
The daily chart remains predominantly bearish: 14-day momentum has held in negative territory since Sep 9, and the moving average setup stays in a bearish configuration, with the 55 and 100 DMAs about to form a bear cross.
This suggests the downside remains at increased risk. A limited correction from 1.1112, the Oct 14 low and the lowest since early Apr 2025, is likely to precede a fresh push lower. The 200 WMA contained the larger downtrend there.
Weak eurozone data and French politics weigh on the euro
Political developments in Europe, particularly in France, became the euro's dominant driver, and initial direction signals are likely to come from that side. However, the single currency showed limited positive impact from the currently calmer situation in France, because the latest EU data add pressure.
The eurozone current account surplus contracted significantly in Aug, to 8.7B from 27.2B in July. Economic sentiment also weakened, at 18.5 in Oct versus 25.8 in Sep, while the spread widened between French 10-year bonds and the bloc's major economies.
Key levels to watch
Losing 1.1200 support may risk a renewed attack at the 1.1130/20 supports, the 50% Fibonacci retracement of the 1.0177/1.2082 uptrend and the 200WMA. A break there would signal bearish continuation.
A lift above the 20DMA would provide relief, but a bullish signal would need an extension above the 1.1320/40 zone, the former low of Jun 24 and the 38.2% Fibonacci level of 1.1711/1.1112.
Source: ActionForex
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