EUR/USD extended its gains on Monday as market mood improved, weighing on the US Dollar, which fell to six-week lows near 98.36 according to the US Dollar Index (DXY). At the time of writing, the pair trades at 1.1757, up 0.32%.
Sentiment has improved, and is a tailwind for the single currency, which seems poised to test the 1.1800 figure in the near term. The two-week ceasefire seems fragile, as the US and Iran could return to negotiations following a not-so-productive meeting last Saturday.
Negotiations in Pakistan lasted 21 hours, and despite achieving some progress, Iran was reluctant to abandon its nuclear program and control of the Strait of Hormuz. The White House retaliated by imposing a blockade in the Strait of Hormuz, as tensions escalated between the two sides.
Recently, the US President Donald Trump said that Tehran wants to make a deal, as a report by the New York Post suggested that Iran was studying halting the Uranium enrichment program, as a US condition for ending the war.
The EUR/USD jumped after the news, while the US dollar weakened to a six-week low, according to the US Dollar Index (DXY). The DXY, which tracks the performance of the buck’s value against six currencies, is down 0.29% at 98.36.
Data in the US has taken the driver’s seat, unless it’s inflation-related. Existing Home Sales fell to a nine-month low of 3.98 million in March, down 3.6% MoM.
Across the pond, elections in Hungary are also driving the Euro higher, as the winner, Peter Magyar, promised to restore democratic standards in the country following a landslide victory over the outgoing Prime Minister Viktor Orban, who had been in power for 16 years.
The Vice President of the European Central Bank (ECB), Luis de Guindos, said the impact of the conflict in the Middle East will depend on its duration. ECB’s Vujcic commented that energy prices remain within the ECB’s baseline scenario.
Traders’ eyes will be on the Producer Price Index (PPI) for March, along with the ADP Employment Change 4-week average and a slew of Fed speakers. In Europe, speeches by ECB’s Chief Economist Philip Lane —twice — and Mario Cipollone would cross the wires.
In the daily chart, EUR/USD trades at 1.1758. The pair holds above the triple simple moving average cluster at 1.1674, keeping the near-term bias tilted to the upside as recent price action rides an ascending sequence of higher closes. The Relative Strength Index (14) at 62.6 leans toward bullish but not yet overbought territory, suggesting buyers retain control while leaving room for further gains before conditions turn stretched.
On the downside, initial support is found at the 1.17 area, reinforced by the 50/100/200-day simple moving averages converging around 1.1674. A deeper pullback would expose former resistance-turned-support near 1.1536, ahead of stronger structural backing around 1.1488, where the prior rising trend line was broken.
(The technical analysis of this story was written with the help of an AI tool.)
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.