EUR/USD steadies near $1.174 ahead of Fed call following France downgrade

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Euro holds steady ahead of Fed

Highlights

- Euro trades at $1.174 after Fitch cuts France’s rating to A+.

- ECB signals rate cuts may be nearing an end, offering support.

- Fed meeting this week likely to set EUR/USD’s next direction.

On the 4-hour chart, EUR/USD continues to trade above a rising trendline from the August lows near 1.139. Immediate support is concentrated between 1.170 and 1.172, where the 20- and 50-period EMAs converge. Holding above this zone is essential for sustaining bullish momentum.

EUR/USD price forecast (Source: TradingView)

Upside resistance sits between 1.1765 and 1.1785, a ceiling that has capped advances several times since late August. A decisive break would clear the way toward 1.182 and potentially retest July highs. On the downside, a break below 1.170 could trigger a retreat toward 1.164, with deeper support at 1.159. The RSI prints at 57, indicating modest bullish momentum with room to extend higher if support holds.

Political risks in Europe and ECB tone

Fitch’s downgrade underscored France’s fiscal strains and political volatility following President Emmanuel Macron’s appointment of Sébastien Lecornu as the third prime minister of his tenure. French yields edged higher, but the euro’s broader response remained muted. The ECB has shifted to a steadier stance, with President Christine Lagarde signaling that rate cuts may be nearing an end as growth risks appear more balanced. This less aggressive easing tone has offered some undercurrent support for the currency, limiting downside pressure from localized risks.Fed meeting dominates outlook

The dollar remained subdued ahead of the Fed’s decision. Futures markets show a near 100% probability of a 25-basis-point cut, with a minority of traders anticipating a larger 50-point move. Recent U.S. data—including softer producer prices and consumer sentiment dropping to a four-month low—has reinforced the dovish narrative.

Markets are also watching political dynamics surrounding the Fed, with debates about independence surfacing as policymakers navigate a cooling labor market and trade-related inflation risks. Chair Jerome Powell’s guidance will likely set the tone for the dollar’s direction, determining whether EUR/USD can break higher or remains range-bound.

EUR/USD short-term outlook

For now, EUR/USD remains confined within a narrow range, with support near 1.170 and resistance at 1.1785. A dovish Fed could provide the catalyst for a breakout toward 1.182, while a more cautious policy signal risks pushing the pair back toward 1.164.

Previously, we discussed that the euro’s resilience has been underpinned by ECB caution and strong technical support zones. This week, the balance of risks will hinge less on European politics and more on whether the Fed’s decision unlocks volatility that propels the pair into a new trading range.

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