EURUSD Holds Near 1.1255 as FOMC Minutes and French Budget Risks Shape Markets
The EUR/USD pair is currently trading near 1.1255, with analysts recommending a cautious range-bound approach in the coming weeks. The US dollar has shown some weakness, but the 10-year Treasury yield remains strong at 5.29%, indicating persistent demand for the dollar. Traders are advised to set buy orders near the 1.1180 support level while preparing for potential breakouts.
Tomorrow's release of the FOMC meeting minutes is a key event, with markets pricing in a 78% chance of a rate pause at the October 27-28 meeting. A hawkish tone in the minutes could drive the US Dollar Index back toward its year-to-date high of 102.53. Short-term option straddles are suggested to capitalize on potential volatility without directional risk.
In Europe, France's fiscal troubles are a significant concern, as the government struggles to pass its 2027 budget. Rising political risk has widened the yield spread between French and German 10-year bonds to over 80 basis points, pressuring the Euro. Out-of-the-money put options on the Euro are recommended as a hedge against potential downside breaks if budget negotiations fail.
EUR/USD rose slightly on Tuesday as the US dollar softened and Treasury yields retreated. The pair gained 0.29% on the day, with the 10-year yield rebounding to 5.29% after dipping towards 5.25%. The US Dollar Index stood at 101.87 after reaching a year-to-date peak of 102.53 on Monday.