EUR/USD Forecast: 1.1270 Breakout Holds Key to Bullish Momentum

The EUR/USD pair extended its advance for a second consecutive session on Thursday, November 5, trading near 1.1265 during Asian hours after reaching a nearly one-week high in the previous session. Weakness in the U.S. dollar, declining Treasury yields and growing expectations of further European Central Bank (ECB) tightening supported the euro. However, concerns over France’s public debt and political uncertainty remain obstacles to a stronger recovery. Investors are now watching the 1.1270 resistance level, which marks the upper boundary of a month-long trading range and could determine the pair’s next major direction.

Dollar weakness lifts EUR/USD demand

The EUR/USD exchange rate gained ground as the U.S. dollar weakened to its lowest level since late September. The Democratic victory in the U.S. midterm elections increased concerns about political gridlock in Washington, potentially limiting President Donald Trump’s proposed fiscal measures and affecting expectations for economic growth.

At the same time, declining U.S. Treasury yields added pressure to the greenback. Expectations of progress toward ending the U.S.-Iran conflict also contributed to falling oil prices, easing concerns that higher energy costs could prolong inflation.

Lower Treasury yields generally reduce the attractiveness of dollar-denominated investments, making the euro relatively more appealing to international investors. This shift has provided additional support for EUR/USD despite uncertainty surrounding the Federal Reserve’s future interest-rate decisions.

Euro gains support from inflation outlook

The euro has also benefited from renewed expectations of tighter monetary policy in the euro area. Data released on Wednesday showed that annual Eurozone inflation increased to 4.0% in October, its highest level in approximately three years.

The acceleration in consumer prices strengthened market expectations of a possible 25-basis-point ECB interest-rate increase in December. Higher borrowing costs can support a currency by improving its relative yield appeal, although the impact also depends on economic growth and financial-market expectations.

However, the euro’s recovery faces domestic challenges. France’s growing public debt and political disagreements have raised concerns about fiscal stability and the government’s ability to implement economic reforms.

These risks could discourage investors from aggressively increasing euro positions, particularly if uncertainty surrounding French government finances intensifies.

Traders are monitoring several important developments:

• Eurozone inflation and upcoming economic indicators.
• ECB officials’ comments on future interest rates.
• Federal Reserve guidance and U.S. Treasury yields.
• French fiscal conditions and political developments.

1.1270 resistance defines technical outlook

From a technical perspective, EUR/USD maintains a constructive short-term bias, trading above the 200-period Simple Moving Average (SMA) on the four-hour chart. However, buyers still need a decisive break above 1.1270, which represents the upper boundary of a trading range established over approximately one month.

The Relative Strength Index (RSI) remains in bullish territory, approaching overbought conditions, while the Moving Average Convergence Divergence (MACD) indicator stays positive. Both signals suggest that buyers retain near-term momentum, although a breakout still requires confirmation.

A sustained move above 1.1270 could strengthen the bullish outlook and open the way for additional gains. Conversely, rejection at resistance could push the pair below 1.1200, exposing the 1.1120–1.1110 support zone.

Conclusion

EUR/USD is benefiting from dollar weakness and stronger expectations of ECB tightening, but the 1.1270 resistance remains the decisive technical barrier. A confirmed breakout could extend the recovery, while renewed selling below 1.1200 would expose 1.1120–1.1110. Until either scenario develops, the pair remains vulnerable to range-bound trading and changing central-bank expectations.