EUR/USD hesitates around 1.1750 with Iran’s ceasefire faltering
- EUR/USD holds losses around 1.1750 as investors pare back hopes of a swift end to the Middle East war.
- Trump extends the ceasefire but keeps the blockade in the Strait of Hormuz.
- Upbeat US Retail Sales and testimony from Fed's Chair Nominee Warsh boosted the USD's recovery on Tuesday.
The Euro (EUR) posts marginal gains against the US Dollar (USD) on Wednesday. The pair, however, remains near the bottom of the last few days’ trading range, around 1.1750, as hopes of a positive outcome from the US-Iran peace negotiations vanish.
US President Trump has extended the ceasefire unilaterally until the end of the negotiation process with Iran, but maintains the blockade on the Strait of Hormuz, which has been considered an act of war and a violation of the fragile ceasefire by Iranian authorities.
Tehran is keeping the suspense about its presence at the next round of peace talks, while the Islamic Revolutionary Guard has stepped up its tone against the US, threatening with “crushing blows” against “the enemy’s remaining assets”, according to a report by Iran’s Tasnim news Agency cited by The Guardian.
The pair dropped nearly 0.4% on Tuesday, hit by downbeat news coming from the Middle East and a stronger US Dollar. Upbeat US Retail Sales data and, above all, a convincing testimony by the Fed Chair Nominee, Kevin Warsh, at the US Senate confirmation hearings, provided a fresh boost to the Greenback.
Technical Analysis: The bullish trend is losing momentum
EUR/USD maintains the constructive bias from late-March lows intact, but recent price action suggests that bulls might be giving up. Technical indicators on the 4-hour chart hint at a neutral to bearish momentum. The Relative Strength Index remains below the 50 line, and the Moving Average Convergence Divergence (MACD) indicator holds in negative territory, suggesting a loss of upside pressure.
The pair edges higher on Wednesday but remains capped below 1.1760 so far, which leaves the weekly highs near 1.1790 at a certain distance. Further up, the April 17 high, at the 1.1850 area, seems out of reach this Wednesday.
On the downside, immediate support lies at Tuesday's low, near 1.1720. Below here, the upward trendline support from the March 30 low, now around 1.1700, and the mid-April lows, between 1.1645 and 1.1675, will come into view.
(The technical analysis of this story was written with the help of an AI tool.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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