EURUSD Holds Steady Amid Political Unrest Across Europe

Key Points

• EURUSD trades near 1.12181, up 0.06%, as the US dollar struggles to establish a clear direction during Tuesday’s Asian session.
• Political unrest in France and Italy raises concerns about European stability, placing pressure on regional equities and government bonds.
• The French-German 10-year government bond yield spread widened by 9.9 basis points to 147.3 basis points on Monday.
• The US Dollar Index reached 102 on Monday, while the US 10-year Treasury yield remained at 5.131%.

Market Move

EURUSD traded near 1.12181 during Tuesday’s Asian session, recording a modest gain of 0.06%. A gradual improvement in investor confidence supported risk-sensitive currencies, although political uncertainty across Europe limited the euro’s advance.

The currency pair moved within a narrow intraday range, trading at a high of 1.12203 and a low of 1.12089. Price action remained concentrated around 1.12180, suggesting that neither buyers nor sellers had established sustained control.

The US Dollar Index traded as high as 102 on Monday, reflecting continued demand despite unstable global conditions. Meanwhile, the US 10-year Treasury yield held steady at 5.131%, leaving EURUSD at risk of European political sentiment rather than US bond yields.

Why Traders Are Watching

Political developments in France have become a source of uncertainty for the euro. French authorities introduced curfews in several cities on Monday after nationwide anti-government protests disrupted public order, adding pressure during the final months of President Emmanuel Macron’s term.

The unrest has raised concerns about France’s fiscal outlook, particularly as Parliament prepares for its first formal vote on the revenue section of the proposed 2027 budget. Further political disagreements could complicate fiscal negotiations and French government debt.

Bond markets have already reflected these concerns. The yield spread between French and German 10-year government bonds widened to 142.3 basis points on Monday. The widening spread indicates that investors are demanding a higher yield premium to hold French debt relative to German bonds.

Political tensions have also extended to Italy, where the government announced plans to deploy 500 troops following two days of unrest. Although the euro has remained relatively stable, instability across major European economies could increase pressure on the currency.

Key Trading Levels

EURUSD experiences a short-term recovery followed by consolidation below 1.12200. The nine-period moving average (MA9) has turned higher following the rebound from 1.12140, although the latest price action suggests momentum is slowing near resistance.has. The pair struggled to sustain gains above 1.12200, making this the immediate resistance level to monitor.

On the downside, 1.12160 represents the first support area. A move below this level could expose 1.12140, where buyers previously emerged. A deeper decline towards 1.12089 would suggest that the recovery has lost momentum.

Bullish and Bearish Setups

A bullish scenario would require EURUSD to establish support above 1.12160 before challenging the 1.12200–1.12203 resistance area. Improving risk sentiment and easing European political concerns could support this move. A confirmed breakout may allow the pair to extend towards 1.12220–1.12240.

Conversely, a bearish scenario could develop if EURUSD continues to encounter selling pressure near 1.12200. A break below 1.12160 would weaken the immediate recovery, while a decline through 1.12140 could expose the session low at 1.12089. Further widening in French-German bond spreads could reinforce this downside pressure.

Disclaimer

The price levels and market scenarios above reflect the author’s assessment at the time of writing. They do not represent financial advice or an official recommendation from VT Markets. Traders should conduct their own analysis and manage risk carefully.

EURUSD Prediction: What’s Next?

EURUSD may remain range-bound in the near term as traders weigh improving global risk appetite against growing political uncertainty in Europe. The pair’s stability suggests that investors have not yet treated France’s political unrest as a broader eurozone financial crisis. However, further pressure on French government bonds could weaken confidence in the single currency.

The next major catalyst will be developments surrounding France’s 2027 budget and European bond markets’ reaction. Progress towards a workable fiscal agreement could ease sovereign risk concerns and support EURUSD. On the other hand, prolonged political unrest or widening bond spreads could push the pair lower.

US monetary policy expectations will also influence the outlook. Elevated Treasury yields and renewed demand for the dollar could limit the euro’s recovery, while softer US yields may provide room for EURUSD to advance.

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