rose on Monday after a correction, trending towards 1.1759. Earlier, the US dollar had partially regained ground following last week's decline, supported by increased demand for safe haven assets amid an escalation of the US-Iran conflict.
Donald Trump reported that the US Navy opened fire and detained an Iranian ship in the Gulf of Oman after it failed to comply with orders when leaving the Strait of Hormuz.
Tehran, in turn, abandoned plans to open the strait after Washington failed to lift the blockade of Iranian ports. Iran also signaled that it would not participate in the second round of talks.
The prolonged conflict is increasing risks to energy supplies, intensifying inflationary pressure and reducing the likelihood of policy easing. Markets are revising their expectations, and the likelihood of a Fed rate cut is decreasing this year.
The base case now assumes rates will remain unchanged in the coming months, probably until the end of 2026.
Technical analysis
On the EUR/USD H4 chart, the market is forming a consolidation range around the 1.1800 level, which currently extends to 1.1737. A bullish wave to 1.1790 is likely. Subsequently, a descending wave could develop to 1.1700. Technically, this scenario is confirmed by the MACD indicator, with its signal line above the zero level but pointing firmly downwards, reflecting continued bearish momentum with the possibility of the downtrend persisting.
According to the H1 chart, the market is forming the structure of the next ascending wave to the level of 1.1790. After reaching this level, a correction to 1.1700 is likely, followed by a possible rise to 1.1745. Technically, this scenario is confirmed by the stochastic oscillator, with its signal line below 50 and pointing firmly towards 80.
Conclusion
EUR/USD has opened the week on a positive note, but the outlook remains fragile following the renewed escalation of the conflict between the United States and Iran. Trump's announcement of a naval incident in the Gulf of Oman and Tehran's withdrawal from planned talks and efforts to reopen the Strait of Hormuz have reignited geopolitical risks.
Concerns over energy supply are intensifying inflation pressures, further pushing away expectations of Fed rate cuts, with rates now expected to remain unchanged through 2026. While technical indicators suggest a short-term rebound towards 1.1790, the broader bearish momentum appears intact, and any sustained euro strength would likely require a true de-escalation.
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.
