EUR/USD dipped slightly on Tuesday, retreating to 1.1762. The US dollar has returned to favour as a defensive asset after US President Donald Trump questioned the sustainability of the truce with Iran and rejected Tehran’s latest peace proposal.
Trump also plans to convene a meeting with his national security team to discuss a potential resumption of military operations and a review of plans to escort commercial vessels through the Strait of Hormuz.
The ongoing conflict continues to keep oil prices elevated, fuelling inflationary pressures and expectations that interest rates may remain higher for longer to contain price pressures.
Investors are now turning their attention to US inflation data for April, which is expected to indicate how the Iran conflict is impacting the economy and help guide potential Federal Reserve decisions.
An additional market factor is the expected meeting later this week between Donald Trump and Chinese President Xi Jinping, which is likely to focus on trade relations and the development of artificial intelligence.
Technical Analysis
On the H4 chart, EUR/USD is trading within a consolidation range around 1.1755, with potential downside towards 1.1688. At the same time, a move higher towards 1.1818 remains possible, with further upside to 1.1870. This scenario is supported by the MACD indicator, with its signal line above zero and pointing firmly upwards, indicating continued bullish momentum.
On the H1 chart, EUR/USD has reached 1.1786. A decline towards 1.1740 is likely, followed by a possible rebound to 1.1760 and further upside towards 1.1818. This scenario is confirmed by the Stochastic oscillator, with its signal line near 20 and pointing firmly upwards.
Conclusion
EUR/USD remains sensitive to geopolitical developments in the Middle East and upcoming US–China discussions. Strong inflation data could support the US dollar, while positive diplomatic progress may ease pressure on the pair and support further euro gains.
