EURUSD hits a higher ground The ongoing negativity with the greenback saw another 100 pips added to the value of the pair. However, the recent pullback in price action has seen the euro test the 1.1600 level.
European currencies are staging a solid recovery after a period of heightened demand for the US dollar, which had previously been supported by geopolitical tensions in the Middle East. Reports that the United States and Iran have reached preliminary agreements regarding a potential ceasefire and the normalisation of shipping through the Strait of Hormuz have significantly improved market sentiment and reduced investors' appetite for safe-haven assets.
With the US and Iran seemingly on track to sign a Memorandum of Understanding to “end the war” (for 60 more days at least) by the end of the week, risk assets are rallying across the board, while crude oil prices are falling to their lowest levels in more than 3 months.
The Euro to Dollar (EUR/USD) exchange rate has recovered to around 1.1610 after finding support near 1.15 earlier this month, but Bank of America believes rallies should be sold. The bank continues to recommend positioning for Euro weakness over the summer and expects EUR/USD to move lower as US economic resilience and Federal Reserve.
EURUSD managed to rebound further as the market was relieved by Iran/US deal. Prices are still facing the resistance zone of 1.1650-90 which is a tricky zone that can push for a drop.
This week, global financial markets will closely monitor two pivotal drivers: the prospects of a US-Iran nuclear deal and the upcoming Federal Reserve meeting. Any signs of progress in the negotiations could strip the geopolitical premium out of oil prices, subsequently weakening safe-haven demand for the US Dollar.
Looking at the 4-hour chart, the pair traded above the 50% Fib retracement level of the downward move from the 1.1685 swing high to the 1.1499 swing low. The pair is now attempting to close above a major bearish trend line with resistance at 1.1595.
Euro advances as US-Iran peace deal weighs on US Dollar
After more than 100 days of war, we now officially have an MOU signed that may act as a launchpad for a formal peace deal within 60 days. Importantly, Iran has confirmed the agreement, with the official signing set to take place in Switzerland on Friday.
EUR/USD is rebounding after finding support at the lower bounds of the April downtrend, but the recovery is now running into a pivotal resistance zone defined by former support. This area represents the first major hurdle for the rebound and could prove decisive for the near-term outlook.
Euro holds steady against the US Dollar as markets await clarity on a possible US-Iran peace deal
The latest news about potential peace deal in the Middle East also contributes to fresh positive tone, although markets need more evidence before reacting.