EUR/USD has pulled back from session peaks near 1.1730, yet it maintains a stable position above 1.1700 at this point. In May, German GfK Consumer Confidence declined more than anticipated. Market participants continue to express optimism regarding a potential US-Iran peace agreement, contributing to the ongoing softness of the safe-haven USD. The Euro continues to strengthen for the second straight day against the US Dollar on Monday, as investors maintain a cautious optimism that the Iran-US discussions could lead to a favorable result. The recent German GfK consumer sentiment data fell short of expectations; however, the effect on the euro has been relatively subdued to this point.
May’s German GfK survey indicated a decline in consumer sentiment, reaching its lowest point in over three years at -33.3, down from -28.1 in April, surpassing the market consensus expectation of -29.5. The primary emphasis, however, continues to be in the Middle East. A recent report from, referencing a US official and two sources knowledgeable about the peace process, indicates that Tehran has submitted a new peace proposal to the US, which has sparked renewed optimism. The report indicates that Iran is proposing to cease hostilities and reopen the Strait of Hormuz, with nuclear negotiations being deferred to a subsequent phase. At this juncture, negotiations for peace are at an impasse. The second round of negotiations, which were set for the weekend, has been cancelled, resulting in oil tankers remaining blocked in Hormuz for two months. Crude prices are hovering near $100 per barrel, posing a risk of pushing the global economy toward recession.
Market participants will be closely monitoring the economic calendar this week, as the US Federal Reserve and the European Central Bank are set to reveal their monetary policy decisions on Wednesday and Thursday, respectively. Both central banks are anticipated to maintain their current interest rates, yet the ECB is poised to indicate a potential increase in the near future, influenced by rising inflationary pressures. On Friday, EUR/USD bears encountered resistance at a cluster of support levels ranging from 1.1645 to 1.1675. This situation enabled the pair to recover some of the losses incurred earlier in the week and rise above 1.1700. Bulls, however, are facing challenges in surpassing resistance at a prior support level just above 1.1730 (April 19 low) in front of the broken trendline, currently near 1.1745.
The technical indicators on the 4-hour chart suggest a slightly positive outlook. The Relative Strength Index is fluctuating near the 50 mark, indicating a neutral stance, whereas the Moving Average Convergence Divergence has shifted slightly positive, suggesting a reduction in downside momentum, though it remains insufficient to overcome the resistance level above. Bulls need to establish confirmation above the specified trendline at 1.1745 to solidify an upward reversal and redirect attention towards the highs from April 22, around 1.1760, as well as April’s peak at 1.1849. Bearish attempts, conversely, are expected to encounter support in the range of 1.1745 to 1.1755, a level that has provided stability for the pair multiple times in mid-April. Looking ahead, the subsequent objective is the low from April, situated between 1.1505 and 1.1525.