Euro remains on defensive below 1.1200 as USD stabilizes ahead of US midterm elections

The EUR/USD pair trades with a mild negative bias during the Asian session on Tuesday, looking to extend the previous day's modest pullback from the 1.1235 area, or a one-and-a-half-week top. Spot prices currently trade just below the 1.1200 mark, though the downtick lacks follow-through as traders seem hesitant ahead of the US midterm elections.

Prediction markets strongly favor Democrats winning the House, and a Republican sweep would be a larger market surprise, which could lift US Treasury yields and the US Dollar (USD). Nevertheless, the election results may infuse some short-term volatility and provide some impetus to the EUR/USD pair. In the meantime, Monday's better-than-expected US macro data, along with hawkish US Federal Reserve (Fed) bets, seems to act as a tailwind for the buck.

The Institute for Supply Management's (ISM) Manufacturing PMI rose from 54.5 in the previous month to 55.5 in October 2026, marking the 10th straight month of expansion. Furthermore, the CME Group's FedWatch Tool indicates that traders are pricing in over a 70% chance that the US central bank will raise borrowing costs in December. This, in turn, acts as a tailwind for the USD, though hopes for Iran diplomacy might cap gains and support the EUR/USD pair.

In fact, US President Donald Trump said on Monday Iran wants to make a deal to end the war and that such an agreement could happen. Adding to this, Iranian Foreign Minister Abbas Araqchi said that consultations through mediators were very intensive. However, several days of negotiations between Iranian officials and Qatari mediators failed to make a major breakthrough despite revised proposals, which keeps the geopolitical risk premium in play.

This might hold back trades from placing aggressive bearish bets on the USD, which, along with concerns about France’s deepening debt levels and political gridlock, should contribute to capping the EUR/USD pair. Traders now look forward to the release of US JOLTS Job Openings for some impetus ahead of the flash Eurozone CPI report and the US ISM Services PMI on Wednesday. The focus, however, will remain on the US Nonfarm Payrolls (NFP) report on Friday.

EUR/USD 4-hour chart

Technical Analysis

Against the backdrop of a decline from the August monthly swing high, the recent range-bound price action witnessed over the past month or so could be categorized as a bearish consolidation phase. Moreover, the EUR/USD pair holds beneath the 200-period Simple Moving Average (SMA) on the 4-hour chart, keeping a near-term negative tone.

That said, a convincing break below the trading range support, near the 1.1100 round figure, is needed to reaffirm the bearish outlook and set the stage for deeper losses. On the topside, immediate resistance is located at the 200-period SMA at 1.1267. Bulls would need to reclaim the said barrier to alleviate downside pressure and open the door to a more constructive bias.