The EUR/USD pair experienced an increase, reaching 1.1790 on Monday. The US dollar made an effort to gain strength; however, a portion of its rally was later reduced. The weekend saw a heightened demand for safe-haven assets due to the escalating conflict in the Middle East. The United States and Israel executed military operations against Iran, leading to the demise of the nation’s supreme leader, Ayatollah Ali Khamenei. Reports have surfaced regarding the significant closure of the Strait of Hormuz, an essential passage for global oil supplies. Tehran has initiated strikes on American positions in the region, heightening concerns about an escalation into a wider conflict.
The dollar received further backing from the recent US producer inflation data. January’s PPI increased more than anticipated, indicating that businesses are transferring tariff-related expenses to consumers, thereby complicating the forecast for a possible Federal Reserve rate reduction. Nonetheless, the market persists in factoring in two 25-basis-point rate reductions from the Fed this year. The current outlook suggests that fluctuations and geopolitical uncertainties may ultimately compel the central bank to relax its monetary policy stance.
The H4 chart of EUR/USD indicates that the market is establishing a consolidation range near the 1.1834 level. A downside breakout is anticipated, with the decline projected to reach 1.1712, and the possibility for the trend to extend further to 1.1590. This bearish scenario is technically validated by the MACD indicator, with its signal line positioned below zero and decisively trending downward, indicating persistent bearish momentum. On the H1 chart, the market is developing the framework for the upcoming downward movement targeting 1.1712. Following the attainment of this level, a corrective ascent to 1.1768 is expected, succeeded by the initiation of a new downward movement towards 1.1650. This scenario is technically validated by the Stochastic oscillator, which shows its signal line positioned below 50 and decisively trending downward towards the 20 level.
The euro is traversing a challenging environment, as safe-haven flows and geopolitical tensions in the Middle East have initially strengthened the US dollar, while unexpectedly high US PPI data introduces further uncertainty regarding Federal Reserve policy. The market continues to expect rate cuts later this year; however, the current technical outlook for EUR/USD indicates a bearish trend, pointing to potential further declines in the near term.