EUR/USD holds above 1.1770, awaiting the outcome of US-Iran peace talks
- EUR/USD holds steady above 1.1770 after pulling back from 1.1825 highs.
- Markets remain moderately optimistic, ahead of a new round of US-Iran peace talks.
- Concerns about the impact of high Oil prices for a protracted period are likely to weigh on the Euro.
The Euro (EUR) remains practically flat against the US Dollar (USD) on Friday, trading at 1.1782 at the time of writing. The pair is on track to its third consecutive weekly rally, as investors’ optimism about the resolution of Iran’s war has propelled the pair to pre-war levels from early March lows.
Traders keep cutting back holdings of the safe-haven US Dollar, as the bombing in the Middle East stops, at least temporarily. Israel announced on Thursday a ten-day ceasefire in Lebanon, and US President Donald Trump confirmed that Washington and Tehran will resume peace talks this weekend.
Nevertheless, the nuclear issue seems to be a key hurdle for a steady peace deal. A news report by Reuters, citing Iranian sources, affirms that US and Iranian negotiators have scaled back their ambitions for this weekend’s talks and are now seeking a temporary memorandum to prevent a return to conflict.
Beyond that, closure of the Strait of Hormuz is another point of friction and maintains Oil prices more than 30% above pre-war levels. The Eurozone is strongly dependent on Crude imports; the energy shock triggered by the war in the Middle East has boosted inflationary levels in the region, which, coupled with weakening economic activity, is raising concerns about stagflation. If these fears increase, the Euro is likely to suffer.
Technical Analysis: Consolidating gains below 1.1825
EUR/USD maintains the near-term bullish bias intact after rallying nearly 2.5% over the last three weeks, although technical indicators on 4-hour chart are showing signs of weakness. The Relative Strength Index (RSI) has eased back to levels right above the key 50 line, while the Moving Average Convergence Divergence (MACD) remains marginally negative, suggesting upside momentum is cooling but not yet reversing decisively.
Support at Thursday's lows around the 1.1770 area is holding bears for now, and closing the path towards the previous tops, between 1.1720 and 1.1740, and the 1.1650 support area (near April 8, 12 lows). A confirmation below that level would negate the bullish structure.
On the upside, immediate resistance remains at the late February highs around 1.1825. Further up, the February 10 and 11 highs, near 1.1930, are likely to be targeted.
(The technical analysis of this story was written with the help of an AI tool.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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