20.10.202612:02 Forex Analysis & Reviews: EUR/USD – Price Analysis and Forecast: Partial Curfews in France Weigh on the Euro

On Tuesday, EUR/USD is holding above the psychologically important 1.1200 level. However, further gains in the euro may be limited, as widespread unrest in France is raising concerns about the country's public finances.

According to the BBC on Monday, French authorities imposed nighttime curfews in certain districts of Paris and other cities following the spread of widespread unrest and looting across the country. French Prime Minister S?bastien Lecornu stated that the government was "fully committed to restoring public order," while not ruling out "localized and partial" movement restrictions in the most affected areas. At the same time, he stressed that a full curfew covering entire cities was not being considered.

The measures taken so far have provided no significant support for the single currency. Market participants need to monitor developments related to political and financial risks in France closely. Any further escalation of tensions could put additional pressure on EUR/USD.

The yield spread between French government bonds and German government bonds (Bunds), which are considered a safe-haven asset, has widened to 147 basis points. This is the highest level since the European sovereign debt crisis of 2011–2012. By comparison, the spread stood at approximately 110 basis points at the end of September.

Meanwhile, in the United States, Federal Reserve official Kevin Warsh expressed confidence in the resilience of the US economy last week but did not clarify whether further interest rate increases would be necessary or when they might occur. According to the CME FedWatch tool, futures markets expect the Fed to leave interest rates unchanged at its October meeting. The probability of a rate hike in December is estimated at 82.8%.

Geopolitical risks are also contributing to cautious market sentiment. In particular, tensions increased following President Zelenskyy's statement that the United States was pressuring Ukraine, rather than Russia, to make concessions. Taken together, these factors create an even less favorable external environment for the euro.

Warsh's speech, delivered in his capacity as a member of the Federal Reserve Board of Governors, received a score of 5.6 out of 10 on the FXS Speechtracker scale. This is slightly below his historical average of 6.1, indicating a relatively restrained tone in his comments despite his positive assessment of structural growth and increased investment activity. His remark that market participants are "too traumatized by the global financial crisis" points to investors' continued tendency to avoid risk.

Warsh also noted an increase in investment supported by current economic policies but refrained from forecasting the Fed's decisions in October and December. As a result, participants in the dollar market must rely primarily on incoming macroeconomic data and potential key policy decisions that the Fed may make later this year.

Warsh's emphasis on the role of artificial intelligence in shaping demand, as well as on managing tail risks—unlikely but potentially highly destructive events—gives his remarks a long-term focus and highlights his concern for financial stability. In turn, this somewhat tempers the short-term hawkish signals in his speech.

The FXS Fed Sentiment Index remained elevated at 127.51 points. This indicates that, despite the somewhat more moderate assessment of Warsh's speech on the FXS Speechtracker scale, the overall direction of the US central bank's monetary policy remains clearly hawkish. For the foreign exchange market, the combination of a high Fed Sentiment Index reading and restrained rhetoric from central bank officials suggests that the dollar continues to receive support from expectations that the Fed will closely monitor inflation and financial stability, even in the absence of clear guidance on monetary policy for 2026.

From a technical perspective, EUR/USD remains under pressure on the daily chart. This is indicated by negative oscillator readings and the fact that the pair is trading below all major moving averages. The psychologically important 1.1200 level provides support. Below it lie the 1.1150 level and the October low. A break below these levels would accelerate the decline toward 1.1080.

The nearest resistance levels are the 14-day EMA and the 20-day SMA, both located near 1.1270. A break above this area would allow the bulls to challenge previous highs.