Euro holds gains above 1.1200 despite French turmoil
The EUR/USD pair holds positive ground near 1.1215 during the early European session on Tuesday. However, the potential upside for the pair might be limited as violent protests in France add to concerns about the country's worsening fiscal outlook.
The EUR/USD currency pair maintained gains above 1.1200 during the early European session on Tuesday, despite protests in France adding to concerns about the country's deteriorating fiscal outlook. French Prime Minister Sébastien Lecornu reiterated his commitment to restoring public order after violent riots and looting across the country.
French government bond yields widened to 147 basis points against German Bunds, the highest level since the 2011-2012 European debt crisis. Traders will closely monitor developments surrounding France's fiscal and political risks. US Federal Reserve Chair Kevin Warsh expressed optimism about the US economy but provided no indication of future interest rate hikes.
Fed funds futures traders see an 82.8% probability of a rate hike in December. The Euro is currently underperforming relative to its peers, with French stocks and bonds lagging and bond spreads versus Germany widening to 145 basis points. Technical analysis shows that EUR/USD is holding below the 100-day simple moving average and the Bollinger Bands' middle band, with resistance near 1.1260 and support at the lower Bollinger band at 1.1110.
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