EUR/USD found support as front-end Eurozone–US spreads narrowed modestly after dovish-leaning comments from Fed Chair Warsh. French sovereign stress has steadied, with the 10-year OAT/Bund spread holding around 135–140bps; the gap remains wider than comparable Eurozone credits, yet still well below peaks seen during the 2011 Eurozone bond crisis. The link between the euro and Eurozone sovereign spreads is described as episodic, leaving rate differentials and broader drivers in the foreground for FX.
ECB Policy Outlook and Fair Value
OAT tensions may marginally tilt ECB risks away from hiking at month-end, while a 25bps December hike is described as all but fully priced in. The bank puts EUR/USD fair value at 1.1285.
Technical Picture
Technically, it points to a rebound from long-term retracement support in the low 1.11s, defined as the 50% retracement of the 2025/26 rally from the 1.01 area, and a push through resistance at 1.1240/50. A bullish weekly reversal is flagged if late-week gains hold into the close, with intraday support at 1.1245/50.
