Double Bottom Reaction Could Trigger an Upside Correction

Central Bank

Economic

Summary:

This second defense of support increases the possibility that a more sustained corrective move higher could develop, with the local resistance zone at 1.1466 emerging as a potential upside target.

BUY EURUSD

EXP

PENDING

1.11700

Entry Price

1.14000

1.10700

1.12112 +0.00166 +0.15%

Pips

PENDING

1.10700

Exit Price

1.11700

Entry Price

1.14000

In the Eurozone, concerns surrounding France’s public finances continue to weigh on the common currency. Ongoing uncertainty has pushed French borrowing costs higher and widened bond yield spreads. Prime Minister Sebastien Lecornu aims to reduce the fiscal deficit from 5.4% of Gross Domestic Product this year to 5.0% by 2027, although strong political opposition could complicate the approval process for the proposed budget.

These concerns, combined with a broader selloff across global bond markets, have contributed to a significant increase in French borrowing costs as investors demand greater compensation for holding the country’s debt. Bank of France Governor Emmanuel Moulin described current conditions in bond markets as “complicated” and stated that France’s economic position remains “serious,” although he emphasized that the country is “not currently facing an economic crisis.” He also noted that securing approval for the 2027 budget is “very important for reassuring markets.”

Economic activity across the Eurozone has shown encouraging signs. The Manufacturing PMI remained at its highest level in four years during September, while industrial production continues to expand at its fastest pace in nearly five years. New orders and backlogs also continue to increase, pointing to a clear improvement in underlying demand conditions.

On Wednesday, Bank of France Governor Moulin stated that tensions in the French bond market remain significant but do not meet the conditions required for support from the European Central Bank (ECB). French 10-year government bond yields resumed their upward move following the temporary relief seen on Tuesday.

According to the minutes from the Federal Reserve’s latest meeting, policymakers broadly supported the September rate increase, and most officials considered another hike before year-end to be appropriate.

Financial markets largely expect the Federal Reserve to leave interest rates unchanged at its October policy meeting. However, according to the CME FedWatch Tool, traders continue to price in a 78.3% probability of another rate increase in December.

Inflation risks linked to oil prices and the conflict in the Middle East, together with concerns over rising public debt, expanding fiscal deficits, and resilient US economic growth, continue to contribute to higher global borrowing costs. Double Bottom Reaction Could Trigger an Upside Correction_1

Double Bottom Reaction Could Trigger an Upside Correction_1

Technical Analysis

EURUSD recently reached the local support level at 1.1160, an area that was also tested on October 4. On that occasion, the pair produced a strong bullish reaction, and the latest test has once again resulted in a rejection from the downside. This second defense of support increases the possibility that a more sustained corrective move higher could develop, with the local resistance zone at 1.1466 emerging as a potential upside target.

The resistance area gains additional importance as it aligns closely with the 50% Fibonacci retracement level. In addition, the 100-period and 200-period moving averages are currently located at 1.1368 and 1.1428 respectively, placing them near the Fibonacci retracement zone. The convergence of these technical levels increases the significance of the area and reinforces its role as a potential objective for a bullish retracement.

In the oscillator area, the RSI is currently trading near the 40 level, although it recently fell below 20, moving deeply into oversold territory. Such extreme readings increase the likelihood of a rebound as downside momentum begins to stabilize. Meanwhile, the MACD continues to display a bullish histogram, although it has started to lose some depth. The signal lines remain below the neutral zone, suggesting that additional confirmation is still required. A bullish crossover above this area would add weight to the upside scenario and strengthen the case for a corrective recovery. For now, the most attractive buying opportunities remain near the local support level, where buyers have already demonstrated their willingness to defend the area on two separate occasions.

Trading Recommendations

Trading direction: Buy

Entry price: 1.1170

Target price: 1.1400

Stop loss: 1.1070

Validity: Oct 20, 2026 15:00:00

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Double Bottom Reaction Could Trigger an Upside Correction

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