EUR/USD Price Forecast: Consolidates above one-week low; seems vulnerable near 1.1500
- EUR/USD consolidates near a one-week low and seems vulnerable to weaken further.
- Escalating geopolitical tensions underpin the USD demand and should cap spot prices.
- The technical setup also favors bearish traders and backs the case for deeper losses.
The EUR/USD pair recovers a few pips after retesting a one-week low earlier this Monday and holds steady around the 1.1500 psychological mark during the Asian session. The upside, however, seems limited as rising geopolitical tensions might continue to benefit the safe-haven US Dollar (USD) and act as a headwind for spot prices.
Reports suggest that the Pentagon is preparing for weeks of ground operations in Iran. Adding to this, the entry of the Iran-backed militant group in Yemen, the Houthis, raises the risk of a further escalation of the conflict in the Middle East. This continues to weigh on investors' sentiment. Furthermore, inflation fears stemming from elevated energy prices continue to fuel hawkish Federal Reserve (Fed) expectations, which could further underpin the USD and cap the upside for the EUR/USD pair.
From a technical perspective, the near-term bias is mildly bearish as spot prices hold beneath the flat 200-hour Exponential Moving Average (EMA) around 1.1550, keeping upside attempts capped. The Moving Average Convergence Divergence (MACD) line fluctuates tightly around the signal and the zero line, and the muted histogram highlights a lack of strong directional momentum. The Relative Strength Index (RSI) near 43 remains below the 50 midline, suggesting sellers retain a modest advantage despite the absence of impulsive downside.
Meanwhile, immediate resistance emerges at 1.1535, with a break exposing 1.1550 as the next barrier in line with the 200-hour EMA. A sustained move above 1.1550 would ease bearish pressure and open the door toward 1.1580. On the downside, initial support stands at 1.1490, followed by 1.1475 if selling pressure extends. A clear drop through 1.1475 would strengthen the bearish bias and target the 1.1450 area next.
(The technical analysis of this story was written with the help of an AI tool.)
EUR/USD 1-hour chart
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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