EUR/USD consolidates near 1.1700 ahead of Trump's Hormuz blockade
- EUR/USD reversal from last week's highs near 1.1740 has been contained above 1.1670.
- The Euro remains relatively steady despite the failure of the Iran talks and the US blockade of Hormuz.
- Markets remain confident that the US-Iran negotiations will resume soon.
The (EUR) retreated from last week’s highs near 1.1740 against the US Dollar (USD) on Monday, but so far is holding well, a few pips shy of the 1.1700 level, after bouncing from session lows at the 1.1670 area during the early Asian session.
The failure of the peace negotiations between the US and Iran and the US pledge to block the Strait of Hormuz have sent Oil prices jumping again, reviving demand for the safe-haven US Dollar. The negative impact on the Euro, however, remains limited so far.
According to Commercebank’s analyst, Thu Lan Nguyen, hopes of de-escalation in the US-Iran war are keeping Euro bears at bay: "At the time of writing, market movements remain limited. Brent crude is trading at just above 100 USD per barrel, and EUR/USD has slipped to below 1.17 - a good distance away from the extreme levels seen during this conflict (...) As long as the market remains hopeful, risk premiums, such as implied EUR/USD volatility, are likely to stay at comparatively low levels."
The economic calendar is thin today, and news from Iran is likely to continue to drive markets. On Tuesday, all eyes will be on European Central Bank’s (ECB) President, Christine Lagarde, who might shed some more light on the monetary policy decision due on April 30.
Technical Analysis: The broader trend remains positive
EUR/USD is holding a mildly bullish near-term bias as it consolidates above previous highs, in the area of 1.1630. Momentum is cooling from earlier overbought readings, with the Relative Strength Index around mid-50s and the Moving Average Convergence Divergence (MACD) hovering close to the zero line, hinting at a pause rather than a full reversal of the recent advance.
On the topside, immediate resistance is located in the 1.1725 -1.1735 area, with further hurdles emerging at 1.1825 (February 26 and March 1 highs) ahead of the February 10 and 11 highs, near 1.1930.
On the downside, the session low at 1.1670 is likely to provide some support, followed by the mentioned 1.1630-1.1640 area (March 23, 25 highs and April 8 low). Further down, the most plausible target is the rising trend support from the March 30 low, now around 1.1590.
(The technical analysis of this story was written with the help of an AI tool.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.