Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1500.
Add a stop-loss at 1.1750.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1750.
Add a stop-loss at 1.1500.
The EUR/USD pair remained stuck in a narrow range as concerns about the US and Iranian talks escalated. It also wavered ahead of the upcoming US inflation report. It was trading at 1.1627 on Thursday morning, down sharply from last month’s high of 1.1850.
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US PCE Report and Iran Jitters
This week started with optimism that the US and Iran were inching closer to a deal that will reopen the Strait of Hormuz. Things have changed, and now, there are signs that the crisis will escalate for longer.
In a statement on Wednesday, President Donald Trump warned that he did not fear a prolonged war with Iran. This means that the progress the two sides have made will be undone.
The two sides have made some concessions during the negotiations. For example, Iran has agreed to reopen the Strait of Hormuz, while the US has agreed to unlock some of the funds held in Qatari accounts.
Still, this deal is not guaranteed as some of Trump’s closest allies have blasted the deal as a giveaway to Iran. If the negotiations fail, it means that crude oil prices will continue rising, pushing the Federal Reserve to start hiking interest rates. In a statement last week, Christopher Waller, an official who has been dovish, said that he would support a hike if inflation remained high.
The EUR/USD pair will next react to the US PCE report, which will come during the US session. Economists expect that report to show that prices jumped in April as energy prices remained at an elevated level.
The pair will also react to the upcoming European consumer and business confidence report. Economists believe that confidence dropped this month amid sticky inflation. Still, the ECB has started to telegraph a potential hike that will happen in June. Polymarket places the odds of a June hike at 91%.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair has come under pressure after peaking at 1.1848. It dropped below the key support at 1.1660, its lowest point on April 30. It recently retested this level, confirming a break-and-retest pattern.
The pair recently crossed the 50-day moving average, while the Percentage Price Oscillator (PPO) has moved below zero. Therefore, the pair will likely continue falling, potentially to the psychological level at 1.1500. A move above the key resistance at 1.1700 will invalidate the bearish outlook.
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