EUR/USD steadies near $1.158 after worst weekly drop of 2025 as dollar rally holds

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Euro steadies near 1.158

Highlights

- EUR/USD stabilizes near 1.158 after hitting two-month lows at 1.154.

- French political turmoil and dollar strength drive euro’s sharp weekly decline.

- Technical setup stays bearish with key resistance at 1.166 and support at 1.154.

The pair continues to move within a descending channel, with sellers maintaining control below the key 1.165 barrier.

Technical setup confirms bearish bias

Technically, the break below 1.165 earlier this week reinforced a downside structure, leaving the pair vulnerable to further losses. EUR/USD price is now testing the 1.154–1.155 zone, which coincides with the 38.2% Fibonacci retracement of the summer advance. A sustained move below this region could expose deeper supports at 1.1485 and 1.14, where the broader uptrend line from midyear aligns.

EUR/USD price dynamics (Source: TradingView)

On the upside, initial resistance sits between 1.162 and 1.166, defined by the 20- and 50-period EMAs. Only a decisive close above 1.17 would reverse short-term momentum in favor of buyers. Momentum indicators underline the prevailing bearish sentiment, with the RSI near 34—hovering just above oversold territory—signaling persistent selling pressure but also a potential for near-term stabilization if profit-taking emerges.

Political uncertainty weighs on euro

The euro’s weakness has been compounded by ongoing political turbulence in France. President Emmanuel Macron is expected to name his sixth prime minister in a matter of hours, a reflection of continued instability within the ruling coalition. The uncertainty has further undermined investor confidence at a time when the European economy is already struggling with sluggish growth and diverging monetary expectations.

Across the Atlantic, the U.S. dollar has benefited from a surge in safe-haven demand, bolstered by concerns surrounding Japan’s new leadership and its potential policy implications for the Bank of Japan. Additionally, the ongoing U.S. government shutdown—now entering its second week—has delayed key economic releases but failed to dent demand for the greenback, which continues to act as a preferred refuge during market stress.

Looking ahead, the University of Michigan consumer sentiment index is set for release later today, offering a key gauge of U.S. household resilience amid the fiscal impasse. Stronger data could reinforce the dollar’s dominance, while weaker readings may prompt a brief corrective bounce in the euro. For now, the broader trend remains tilted in favor of the dollar, with EUR/USD likely to stay under pressure unless political and macroeconomic headwinds ease in Europe.

Earlier coverage highlighted 1.154 as a critical support zone for the pair. That level continues to serve as a battleground between buyers and sellers, with a breakdown potentially extending losses toward the 1.148 region and a rebound requiring a firm close above 1.166 to shift momentum back upward.

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