EUR/USD is experiencing upward momentum, approaching 1.1475 during the early European session on Tuesday. The negative tone of the pair persists beneath the 100-day SMA, accompanied by bearish RSI momentum. The initial support level is positioned at 1.1445, while the first upside barrier is identified at 1.1545. The EUR/USD pair is currently positioned in positive territory, trading around 1.1475 during the early European session on Tuesday. The Euro edges higher against the US Dollar amid improved risk sentiment as traders pinned their hopes on US-Iran talks. Policymakers from the Federal Reserve are set to address the public later on Tuesday, featuring remarks from John Williams, Philip Jefferson, and Thomas Barkin. Market participants are closely monitoring potential developments regarding US-Iran discussions at the United Nations General Assembly this week. On Sunday, Washington and Tehran engaged in a war of words, although US President Donald Trump expressed a willingness to meet with Iranian President Masoud Pezeshkian, who is anticipated to be in New York this week for the UN General Assembly.
Conversely, political instability in Germany may pose a threat to the integrity of the shared currency in the short run. The far-right Alternative for Germany secured the top position in state elections held in northeastern Germany on Sunday. This outcome marked a significant setback for Chancellor Friedrich Merz’s conservative party, which experienced its most severe regional election defeat in postwar Germany, thereby placing his hold on power in a precarious situation. Analysts highlight rising political risk in Germany after Chancellor Merz’s CDU suffered a historic setback in the north-eastern state of Mecklenburg-Vorpommern, where the party “won just 4.9% of the vote … the party’s worst result in any state election in Germany’s postwar history.” They argue that “the latest results will embolden CDU critics who blame Chancellor Merz’s low personal ratings to seek a change at the top of the party,” adding that, “at the same time, the latest political and fiscal developments in European could contribute to undermining confidence in the euro in the near-term.”
The FXS Speechtracker score of 8/10 indicates a slight hawkish shift compared to the historical average of 7.4/10, highlighting a greater-than-normal focus on continued policy restraint. Musalem’s warning that without additional tightening inflation is likely to remain substantially above the 2% target in 18 months, alongside the view that interest rates “likely need to rise further” despite a labour market around full employment and broad-based commodity shocks, signals a clear preference for earlier, incremental hikes to prevent entrenched price increases near 3%. The characterisation of inflation as still “too high” even after stripping out supply factors, along with business contacts planning price rises closer to 3%, reinforces a bias toward continued restrictive policy that is supportive for the Dollar on a relative rates narrative. The FXS Fed Sentiment Index increased by 0.42 points to 149.96, maintaining the overall Fed tone in a distinctly hawkish position, significantly above the neutral threshold of 100. This incremental uptick, aligned with the stronger FXS Speechtracker reading, confirms that Musalem’s remarks marginally intensify expectations for sustained higher policy rates, a backdrop that tends to underpin the Dollar versus lower-yielding peers.
In the daily chart, EUR/USD maintains a bearish near-term outlook as the spot remains below the 100-day simple moving average and the Bollinger middle band. The pair is sliding along the lower half of the Bollinger envelope, while the 14-day Relative Strength Index at 36 remains just above oversold territory. This indicates that selling pressure continues to prevail, although downside momentum is not particularly severe. On the downside, immediate support is provided by the Bollinger lower band near 1.1445, where sellers may begin to realise profits on extended intraday movements. A breach of this magnitude could reveal the July 14 low of 1.1378, succeeded by the July 28 low of 1.1353. On the topside, initial resistance is observed at the 100-day simple moving average, positioned at 1.1545. Any follow-through buying above the mentioned level could pave the way to the Bollinger middle band at 1.1575, en route to the September 9 high of 1.1654, and then the Bollinger upper band up at 1.1700.
