The EUR/USD pair experiences a decline to approximately 1.1575, interrupting its three-day upward trend during the early European session on Tuesday. The Euro edges lower against the US Dollar as traders remain cautious about the US-Iran conflict and the closure of the Strait of Hormuz. On Tuesday, a source indicated that the UK Maritime Trade Operations has acknowledged receiving a report concerning an incident in the vital waterway. UKMTO reported that a company security officer indicated that the vessel was impacted by an unidentified projectile during its outbound transit of the strait. On Monday, US President Donald Trump stated that he has no interest in renewing the expiring agreement with Iran.
Meanwhile, Iran’s Foreign Ministry spokesman Esmail Baghaei indicated that a deal has been difficult to achieve owing to security complexities and the “obstructionist behavior of destructive elements,” asserting that the US must eliminate its blockade. Ongoing tensions in the Middle East may strengthen a safe-haven currency like the Greenback, potentially creating a headwind for EUR/USD in the near term. However, diminished expectations for a September Federal Reserve rate hike, prompted by lacklustre US economic data, could exert downward pressure on the USD. Data revealed last week that US Retail Sales experienced a decline in July, marking the first decrease in nine months. This downturn followed unanticipated job losses in the previous month and subdued inflation figures.
Traders anticipate a 35% probability of a rate hike at the Fed’s September meeting, a decrease from the 47% observed a month prior, as indicated by the CME FedWatch tool. Strategists highlight that the recent “firming trend in the EUR reflects economic resilience in the Eurozone despite headwinds from energy and drought conditions as well as the narrowing yield spreads between the Eurozone and the US.” They note that this combination of solid underlying activity and a reduced rate disadvantage versus the US is helping to sustain demand for the single currency. In the daily chart, EUR/USD exhibits a slight bullish near-term inclination as the spot consolidates around the daily opening pivot at 1.1573, while also receiving support from the 100-day simple moving average situated just below.
Price also stands above the 20-day Bollinger middle band near 1.1498, reinforcing a constructive tone, while the Relative Strength Index (14) at 62 suggests firm but not extreme upside momentum. On the topside, initial resistance is situated at the 20-day Bollinger upper band near 1.1642, where buying pressure may begin to diminish. On the downside, immediate support is observed at the 100-day SMA at 1.1570, succeeded by the Bollinger middle band near 1.1500 and the lower band around 1.1355. These levels collectively delineate a broader demand zone should a more significant pullback occur.
