Started the week around 1.1600. The main currency pair closed last week practically unchanged. Markets continue to closely monitor the situation in the Middle East. Despite the current uncertainty, a series of mixed signals from the United States and Iran have bolstered investors' hopes for a possible diplomatic deal.
At the same time, oil prices remain about 50% higher than pre-conflict levels. This dynamic continues to sustain inflationary pressure, forcing major central banks to maintain a cautious approach to monetary policy.
Minutes from the latest FOMC meeting revealed that most Fed officials still allow for the possibility of additional rate hikes, particularly if inflation remains stubbornly above the 2% target.
Meanwhile, markets are increasingly pricing in a 25 basis point Fed rate hike by the end of the year.
US markets will be closed on Monday, so EUR/USD volatility is expected to be minimal.
Technical analysis
On the EUR/USD H4 chart, the pair is trading within a consolidation range around 1.1616, which currently extends to 1.1640. A move lower to 1.1600 is likely (testing from above), followed by a rise towards 1.1660. Technically, this scenario is confirmed by the MACD indicator, with its signal line above zero and pointing firmly upwards, indicating continued bullish momentum.
According to the H1 chart, the market has completed the structure of the next growth wave to the level of 1.1640. A drop to 1.1600 is likely, followed by a rise to 1.1660 and another drop to 1.1555. Technically, this scenario is confirmed by the stochastic oscillator. Its signal line is below 50 and pointing firmly down to 20.
Conclusion
EUR/USD trades quietly at the start of the week, with markets caught between geopolitical hopes and persistent inflation pressures. While conflicting signals from the United States and Iran have raised expectations of a possible diplomatic breakthrough, oil prices remain very high, around 50% above pre-conflict levels, keeping central banks on alert. The FOMC minutes revealed that most Fed officials still see the possibility of additional rate hikes if inflation remains above target, and markets are now pricing in a 25 basis point increase by the end of the year. With US markets closed for the holiday, volatility is expected to remain subdued. Technically, a short-term decline towards 1.1600 and potentially 1.1555 looks likely before any possible bounce.
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.
