EUR/USD outlook: Currency Pair of the Week | October 12, 2026

After falling for the fifth consecutive week, the EUR/USD has kicked off this week on a downbeat note. As well as macro pressures, strong bearish momentum prevented the pair from staging a meaningful comeback earlier in the day, leading to weakness in the afternoon trade. The popular pair could be heading towards the 1.10 handle barring a surprise reversal in the dollar’s bullish trend, or improvement in euro area fundamentals. But further ahead, perhaps later in the year or in early 2027, the EUR/USD outlook could a lot more stable. For now, only with a sharp drop in oil prices, or if we see the return of the US dollar debasement trade amid concerns over US fiscal policy, could one expect the single currency to end its bearish bias. For now, US inflation remains sticky, Treasury yields are elevated and expectations of tighter Fed policy should keep the greenback supported against major currencies.  A potentially hot US September CPI report this week could reinforce these expectations.

 

French fiscal risks, oil pressure keep EUR/USD outlook undermined

 

The US dollar remained in demand in the first half of Monday’s session, weighing on the major FX pairs. News over the weekend, including continued Houthi strikes in Riyadh has had negative impact on foreign currencies so far, especially those where the economy relies on energy imports. The EUR/USD is particularly vulnerable as lingering concerns over French fiscal policy continue to undermine the euro. With French elections in April 2027, fiscal concerns could continue to weigh on the single currency in the weeks ahead. For now, I expect the EUR/USD to remain in a moderately bearish trend and potentially visit the 1.10 level in the coming days or weeks.

 

A sharper deterioration in French bonds could accelerate the euro selling pressure, especially if the contagion spreads to other European countries. That outcome could force the ECB to abandon further rate hikes and potentially even halt quantitative tightening. In that scenario, it will have to absorb higher inflation in order to avoid further chocking the economy.  

 

For now, high US yields, elevated energy prices and rising cross-market volatility create a tougher environment for the euro and emerging-market currencies. The dollar remains the safer bet until the macro backdrop starts to turn.

 

Technical analysis: EUR/USD on the brink

 

The EUR/USD remains under heavy pressure, having closed lower for the fifth consecutive week last week. From a technical analysis perspective, therefore, momentum is clearly bearish, with price consolidating near the recent range lows in recent days.

 

 

The 1.1215/20 level, marking the 127.2% Fibonacci extension level of the last upswing that began back in June, has now turned into resistance. So, this is an important level to watch on the EUR/USD chart in the week ahead. A break back above it could see the level turn back into support and potentially signal some stabilisation.

 

If that doesn’t happen and we continue to see weakness in the currency pair, the immediate downside target is the liquidity sitting below last week’s low, around 1.1160.

 

If that level breaks, 1.1000 would become the next major downside target, with 1.1100 likely to attract some attention on the way down.

 

Meanwhile, the 161.8% Fibonacci extension of the last upswing that began back in June comes in at around 1.1085, making this another important downside level to watch.

 

On the upside, 1.1215/20 is the first key resistance. Above that, there isn’t much in the way of obvious resistance until the 1.1325–1.1355 area.