The EUR/USD pair gains momentum to near 1.1235 during the early European trading hours on Wednesday. The US Dollar (USD) weakens against the Euro (EUR) as early results from the US midterm elections showed the Democrats have seized control of the US Senate and won a majority in the US House of Representatives, taking control from Republicans.
"Given the Democrats are favoured right now, our expectation is that they will take control of both the House and the Senate," said Carol Kong, currency strategist at Commonwealth Bank of Australia. If that pans out, the US dollar could sell off further from here, because a Democratic sweep would limit government spending over Trump's term,” Carol added.
51 seats are needed to win the upper chamber of Congress, while 218 seats are required to build a majority in the House of Representatives. With historic wins in Texas, Iowa, Kansas, and South Carolina, the Democrats now have 52 seats. 51 seats are needed to win the upper chamber of Congress.
Meanwhile, Democrats secure 224 seats in the US House of Representatives, and Republicans win 131, according to live data from the Decision Desk HQ.
Euro upside momentum builds as EUR eyes 1.1250 resistance
Strategists at UOB Group note that the Euro’s latest push higher comes after a period of subdued price action. They recall that “two days ago, EUR briefly rose to 1.1237 and then retreated,” and when the pair was trading around 1.1190 yesterday, they highlighted that “the brief advance did not lead to any increase in upward momentum,” prompting an expectation for EUR “to trade in a range between 1.1160 and 1.1220.” The currency subsequently respected that view, holding within “a narrower range of 1.1174/1.1206” and closing “little changed at 1.1193 (+0.07%).”
However, UOB now points to a clear shift in tone after EUR “rose sharply in the early Asian session today.” They judge that “upward momentum is building, and there is room for EUR to test 1.1250,” while cautioning that “it is too early to determine whether EUR can break clearly above this level.” In a separate update, the bank reiterates that the “renewed upward momentum suggests it could test 1.1250,” but stresses that “it must close above this level before a move to 1.1280 is likely.” On the downside, UOB flags that the “strong support” level is now situated at “1.1160.”
Nagel flags likely December hike, supporting Euro upside risks
ECB’s Nagel delivers a stronger-than-usual hawkish signal, with an FXS Speechtracker score of 8.2 versus a historic 7.0, underscoring a clear tightening bias. The remark that “a rate hike in December is very likely to be necessary” and that inflationary pressures are approaching the adverse scenario points to upside risks for Euro rates and supports Euro resilience on the FX side.
Nagel’s insistence that the ECB “can and must prevent an energy price spike from causing broad-based inflation” reinforces a readiness to lean against second-round effects, adding to the hawkish tone. Confidence that France will “get a grip on its budget issues” and the statement that this is “not a task for monetary policy” suggest fiscal concerns are not yet seen as a constraint on ECB tightening, keeping Euro rate expectations skewed toward further hikes rather than an early pivot.
Technical Analysis: EUR/USD remains capped below the 100-day SMA
In the daily chart, EUR/USD remains under bearish pressure as it holds below the 100-day simple moving average (SMA), keeping the broader trend capped despite the recent rebound. Price is trading above the Bollinger Bands’ 20-day SMA middle band, hinting at a modest recovery within a still-depressed structure, while the Relative Strength Index (RSI) at 48.9 sits just below neutral, suggesting momentum is stabilizing rather than decisively turning higher.
On the downside, initial support level is seen at the Bollinger middle band at 1.1195, followed by the lower limit of Bollinger Band around 1.1132. The next contention level is seen at the 1.1100 psychological level, followed by the May 12, 2025 low of 1.0951.
On the topside, immediate resistance level aligns at the upper boundary of Bollinger Band near 1.1255, en route to the June 24 low of 1.1325. The more meaningful barrier is located at the 100-day SMA around 1.1420.
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