EUR/USD under pressure as resistance 1.1790 holds back bulls

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EUR/USD under pressure as resistance 1.1790 holds

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Anton Kharitonov

07.05.2026

EUR/USD under pressure as resistance 1.1790 holds back bulls — EUR/USD

EUR/USD is currently driven by three main factors: expectations regarding Fed and ECB interest rates, oil prices and the situation in the Middle East, as well as the gradual weakening of the dollar’s structural appeal as a clear “safe haven.” During yesterday’s session, amid a weaker dollar, the euro tested resistance around 1.1790, but bulls failed to break through, keeping the risk of a pullback toward 1.1720–1.1700.

ECB and the inflation regime

The ECB has officially kept its key rate at 2.15% following its April and subsequent meetings, but the tone of policymakers has become noticeably more hawkish. Lagarde and several Governing Council members explicitly noted that a rate hike is no longer a distant prospect but a real option. Inflation in the eurozone remains around 3% year-over-year, largely supported by rising energy and oil prices, increasing the likelihood of a hike as early as June–July, provided inflation does not show a meaningful slowdown.

Previously, the market was mostly pricing in further easing from the ECB, but it is now weighing scenarios of holding rates or even slightly increasing them. This provides additional fundamental support for the euro against the dollar and makes the upward trend in the pair more sustainable.

Fed stance and the role of the dollar

The Fed continues to hold its key rate in the 3.5–3.75% range after several consecutive meetings, with FOMC projections from March 2026 clustering around these levels. The IMF and several major banks expect only one 25 bps rate cut this year, emphasizing that a more aggressive easing cycle would require either labor market weakening or a notable decline in inflation, including in the energy segment.

At the same time, the US economy appears resilient but not overheating, while inflation is again being fueled by rising oil prices. As a result, the dollar is losing the strong structural advantage it had in 2022–2024. In this environment, EUR/USD is not falling even amid relatively strong US data, suggesting the market expects gradual and controlled easing from the Fed rather than a return to a hawkish stance.

Geopolitics, oil, and safe haven demand

The Middle East remains one of the key drivers for EUR/USD. The US–Iran conflict, tensions around the Strait of Hormuz, and shifts in tariff policy are keeping oil near four-year highs, increasing inflationary pressure and forcing both central banks to account for overheating risks. Previously, any geopolitical escalation would almost automatically push the euro lower and support the dollar as the primary safe haven; now the reaction is noticeably weaker. Investors are increasingly factoring in US-specific risks (deficit, debt, policy) as well as relatively high ECB rates, making the euro more attractive in the medium term.

At the same time, a sharp escalation around the Strait of Hormuz or a new round of sanctions could quickly push the pair into a deep risk-off regime. In that case, the dollar could once again dominate as a safe haven asset, and EUR/USD could drop into the 1.12–1.14 range if markets shift away from fundamentals toward defensive positioning.

As noted in EUR/USD remains range-bound as the war in Iran still weighs, in the near term the pair may continue trading within a range depending on developments in the Middle East.

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