Last Updated on 22/09/2026
- EUR/USD trades modestly higher near 1.1470 during early Asian trading on Tuesday.
- Political uncertainty in Germany has intensified after two more weak state election results.
- Fed’s Musalem indicated that additional interest-rate hikes may be necessary to keep inflation under control.
Fundamental Analysis
EUR/USD trades slightly higher around 1.1470 during early Asian hours on Tuesday. Hopes for progress in Middle East diplomacy are supporting risk-sensitive assets, including the Euro, against the US Dollar. Market participants are now waiting for further comments from Federal Reserve officials later on Tuesday for fresh trading signals.
Iranian President Masoud Pezeshkian is scheduled to head an Iranian delegation to the United Nations General Assembly in New York on Tuesday, as expectations for a diplomatic resolution to the Middle East conflict resurface, according to CNBC. Investors will closely follow developments related to potential US-Iran negotiations.
US President Donald Trump also indicated that he would “probably” consider meeting his Iranian counterpart on the sidelines of the UN General Assembly.
Meanwhile, growing political uncertainty in Germany could put pressure on the Euro. The far-right Alternative for Germany (AfD) came first in state elections in northeastern Germany on Sunday, while Chancellor Friedrich Merz’s conservative party recorded its weakest regional election result in postwar history, adding to pressure on his government.
Hawkish signals from Fed policymakers could provide additional support for the US Dollar and limit gains in EUR/USD. Chicago Fed President Austan Goolsbee said Monday that US inflation may no longer be driven mainly by tariff and energy-price shocks, but also by strong demand, which could require the Fed to raise interest rates at a faster pace.
St. Louis Fed President Alberto Musalem similarly said that further rate increases may be necessary to bring inflation down, citing strong demand and a broader commodity-price shock that has extended beyond oil.
Euro sentiment weakens as German political risks increase
MUFG analysts cautioned that recent political and fiscal developments in Europe could undermine confidence in the Euro in the near term. They pointed to a greater risk of political instability in Germany following two disappointing state election results for the governing parties over the weekend, which could further weigh on investor sentiment toward the single currency.
Technical Analysis: EUR/USD remains bearish below the 100-day SMA
On the daily chart, EUR/USD maintains a bearish short-term bias as the pair remains below both the 100-day Simple Moving Average (SMA) and the middle Bollinger Band. The price is hovering just above the lower Bollinger Band, indicating that the pair is testing the lower boundary of its recent trading range. Meanwhile, the Relative Strength Index (RSI) near 34.5 remains above oversold territory, pointing to continued downside pressure without yet signaling extreme conditions.
On the upside, the first resistance level is located at the 100-day SMA around 1.1545, followed by the Bollinger Band midpoint near 1.1575. A stronger resistance zone is seen around 1.1705, where the upper Bollinger Band is positioned. On the downside, the lower Bollinger Band near 1.1445 provides immediate support. A sustained break below this level could signal further downside for EUR/USD.
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