EUR/USD remains in a strong zone, but this is no longer just a technical rally: the pair is trading around 1.1800 amid shifting rate expectations, with the market increasingly pricing in earlier Fed easing alongside a more cautious ECB. At the same time, the upper boundary of the 1.1800–1.1840 range remains solid resistance that could cap bullish momentum in the near term, while the 1.1720–1.1680 area serves as immediate support. A break below this zone would open the way toward 1.1660–1.1640.
Fed, ECB, and inflation
The US picture remains mixed: April NFP came in stronger than expected, with employment rising by 115K and unemployment holding at 4.3%, which does not give the Fed a clear signal to cut rates quickly. However, consumer sentiment has deteriorated sharply: the preliminary Michigan index dropped to 48.2, a new low, reinforcing the case for weakening demand and potential economic cooling later this year.
In the eurozone, inflation has accelerated: according to Eurostat, annual inflation rose from 2.6% in March to 3.0% in April, supporting a more hawkish ECB stance. As a result, the market is increasingly discussing not a dovish pivot but a more cautious or even hawkish ECB, especially if energy prices remain elevated.
Oil and Iran
Geopolitics is currently one of the key drivers for FX: oil has surged above $100 per barrel for Brent, with some estimates already pointing toward $105 amid risks of a breakdown in US–Iran negotiations and rising tensions around the Strait of Hormuz. This matters for the euro because higher energy prices worsen Europe’s trade balance more than that of the US, while also boosting demand for the dollar as a safe-haven asset.
What it means
In the near term, the base case for EUR/USD remains moderately bullish if US inflation slows and Middle East tensions do not escalate further. However, if oil continues to rise and risks around Hormuz intensify, the dollar could quickly regain momentum and push the pair back toward 1.1600.
In the short term, as previously noted in EUR/USD under pressure as market awaits U.S. NFP report, the pair may continue to trade within the current range.
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