EUR/USD on the Plus Side: Middle East Truce Proves Fragile

EUR/USD rose to 1.1667 on Thursday. The US dollar partially recouped its losses from the previous session, as market sentiment remains cautious amid a fragile truce between the US and Iran.

The situation around the Strait of Hormuz remains tense. According to Iranian media, the passage of tankers is still restricted following new strikes in the region. Iranian representatives have alleged violations of several ceasefire conditions.

The dollar fell sharply the previous day following the announcement of a two-week truce, which led to a drop in oil prices and temporarily eased inflation fears.

An additional factor was the release of the Federal Reserve's meeting minutes. Some participants acknowledged the possibility of raising rates to contain inflation, though many still anticipate subsequent policy easing.

Investor attention is now focused on macroeconomic data, including consumer spending reports, the PCE index, and the upcoming CPI release, which will provide further insight into inflation. All of these could determine the near-term direction of markets.

Technical Analysis

On the H4 chart of EUR/USD, the market is forming a consolidation range around 1.1683. A downward wave is expected, with a continuation to 1.1606 as a local target. Subsequently, a move higher back to 1.1683 is anticipated. Technically, this scenario is confirmed by the MACD indicator, with its signal line above zero but pointing firmly downwards, reflecting continued bearish momentum and the potential for the downtrend to persist.

On the H1 chart, the market is forming the structure of the next downward wave to the 1.1616 level. After reaching this level, an increase to 1.1666 is expected, followed by a further decline to 1.1494. Technically, this scenario is confirmed by the Stochastic oscillator, with its signal line below 50 and pointing firmly downwards towards 20.

Conclusion

EUR/USD remains on the front foot, though the dollar has managed to claw back some ground as the US-Iran truce shows signs of strain. Reports of continued restrictions on tanker movements through the Strait of Hormuz and alleged ceasefire violations have reintroduced caution into markets. The Fed minutes revealed a divided committee, with some members open to rate hikes while others lean towards eventual easing, adding to the uncertainty. With key US inflation and consumer data on the horizon, the pair's direction remains uncertain. Technically, near-term downside appears likely, but the broader trend will depend on whether the fragile truce holds or geopolitical tensions reignite.

By RoboForex Analytical Department

Disclaimer:

Any forecasts contained herein are based on the author's particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.