In the wake of yesterday’s holiday, liquidity has normalized across financial markets. However, risk sentiment remains fragile due to escalating tensions in the Middle East. Traders are closely monitoring developments after Donald Trump warned of potential strikes on Iranian infrastructure if the Strait of Hormuz were to remain closed. This uncertainty continues to favor safe-haven currencies, weighing on risk-sensitive assets like EUR/USD. From a price action perspective, EUR/USD maintains a bearish bias. The pair attempted a recovery but faced rejection near the 1.1571 level, subsequently declining toward the 1.1525 support zone. A decisive break below the 1.1500 threshold would reinforce the downside outlook.
Technical indicators support this bearish scenario. The Relative Strength Index remains below the neutral 50 level, indicating sustained selling pressure. Meanwhile, the MACD and moving averages continue to signal a prevailing downtrend. If bearish momentum accelerates, EUR/USD could test the 1.1400 support level, echoing a similar sharp decline observed in the middle of last month. On the upside, bullish momentum would require a sustained move above the 1.1640 resistance level to invalidate the current downtrend and initiate a recovery phase.
On the macroeconomic front, attention is directed toward Eurozone data releases, including the Sentix Investor Confidence Index and Services PMI. These indicators may reflect the impact of geopolitical tensions and energy price volatility on investor sentiment, though their market impact could remain limited under current conditions. In the United States, the Durable Goods Orders report will be closely watched for insights into economic strength and demand conditions.
Fundamentally, EUR/USD continues to reflect divergence in monetary policy expectations between the European Central Bank and the Federal Reserve. Persistent inflation in the Eurozone has raised expectations of further tightening by the ECB, lending support to the euro. In contrast, the Federal Reserve remains cautious, closely evaluating the inflationary impact of rising oil prices before adjusting policy. This divergence remains a key driver influencing EUR/USD direction in the near term.