On Thursday, EUR/USD experienced an increase, reaching 1.1667. The US dollar managed to recover some of its losses from the prior session, reflecting a cautious market sentiment in light of the delicate truce between the US and Iran. The dynamics surrounding the Strait of Hormuz continue to exhibit significant tension. Reports indicate that the movement of tankers remains limited due to recent strikes in the area. Representatives from Iran have claimed that there have been breaches of multiple ceasefire conditions. The dollar experienced a significant decline the prior day after the declaration of a two-week truce, resulting in a decrease in oil prices and a temporary alleviation of inflation concerns.
The release of the Federal Reserve’s meeting minutes was another contributing factor. Several participants recognized the potential for increasing rates to manage inflation; however, a significant number continue to expect future policy relaxation. Investor focus has shifted to macroeconomic indicators, such as consumer spending reports, the PCE index, and the forthcoming CPI release, which will offer additional clarity on inflation trends. The near-term direction of markets could be influenced by all of these factors. The H4 chart of EUR/USD indicates that the market is establishing a consolidation range near 1.1683. A downward movement is anticipated, with a continuation towards 1.1606 identified as a local target. A subsequent upward movement towards 1.1683 is expected. This scenario is validated by the MACD indicator, which shows its signal line above zero yet decisively trending downward, indicating sustained bearish momentum and the likelihood of the downtrend continuing.
On the H1 chart, the market is establishing the framework for the upcoming downward movement towards the 1.1616 level. Following the attainment of this level, an upward movement to 1.1666 is anticipated, succeeded by a subsequent drop to 1.1494. This scenario is validated by the Stochastic oscillator, which shows its signal line positioned below 50 and trending decisively downward towards 20. EUR/USD continues to show strength, although the dollar has regained some ground as indications emerge of strain in the US-Iran truce. Reports of ongoing limitations on tanker movements through the Strait of Hormuz and purported ceasefire violations have reinstated a sense of caution in the markets.
The Fed minutes disclosed a split among committee members, with certain individuals receptive to rate increases, while others favor a future easing, contributing to the prevailing uncertainty. As important US inflation and consumer data approach, the trajectory of the pair continues to be ambiguous. In the short term, a decline seems probable; however, the overall trajectory will hinge on the stability of the tenuous truce or the resurgence of geopolitical tensions.