fell to 1.1549 on Monday, and the US dollar extended its gains from the previous session amid increased demand for safe-haven assets as the conflict in the Middle East escalates.
The confrontation between the United States and Israel against Iran has entered its fourth week with no signs of de-escalation. Donald Trump has threatened to attack Iran's energy infrastructure if the Strait of Hormuz is not reopened. Tehran has announced that it is prepared to strike key US and Israeli targets in the region in response.
High oil prices continue to fuel inflation concerns and reduce the likelihood of an imminent rate cut by the Federal Reserve. Some market participants are even starting to consider the possibility of a rate hike later this year.
Last week, the Federal Reserve kept rates steady as expected. Jerome Powell noted that it is still too early to assess the full economic impact of the conflict with Iran.
The European Central Bank, the Bank of England and the Bank of Japan also left rates unchanged but signaled they were willing to tighten policy further if inflationary pressures persisted.
Technical analysis
On the H4 chart, EUR/USD is forming a consolidation range around 1.1526. A bullish breakout is expected, with a continuation wave towards 1.1647 as a short-term target. Subsequently, a new bearish wave is anticipated until 1.1529. Technically, this scenario is confirmed by the MACD indicator: its signal line is above zero and pointing firmly upward, reflecting the current bullish momentum and the possibility of the uptrend continuing.
According to the H1 chart, the market is forming the structure of the next descending wave towards 1.1499. After reaching this level, a rebound to 1.1556 is expected, with the potential for the subsequent wave of growth to extend to 1.1647. Technically, this scenario is confirmed by the stochastic oscillator: its signal line is below 50 and pointing firmly towards 20.
Conclusion
EUR/USD remains under pressure as geopolitical risks in the Middle East continue to drive safe-haven demand for the US dollar. As the conflict enters its fourth week and oil prices remain elevated, inflation concerns persist, delaying expectations of rate cuts from the Federal Reserve. The central banks of the main economies remain alert and continue to apply restrictive measures on the table. While technical indicators suggest a possible near-term recovery, the broader outlook for the euro remains fragile as market risks show no signs of abating.
By RoboForex Analysis Department
Disclaimer: Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
