The Euro is steady near six-week lows around 1.1600 on Wednesday after falling from the 1.1660 area on Tuesday. Oil prices remain above $100 as US–Iran tensions support the US Dollar and weigh on the Euro.
Donald Trump said the US could attack Iran in two or three days if Tehran does not sign a peace deal, and JD Vance said the US is “locked and loaded” to restart military action. Iran’s Foreign Minister Abbas Araghchi warned of “many more surprises” if the US resumes hostilities.
The Strait of Hormuz blockade is nearing its third month, reducing global supply of oil, gas, and other commodities. Brent crude is near $108.00 per barrel, adding pressure to the Eurozone’s oil-importing economies.
Germany’s Producer Prices Index rose 1.7% year-on-year in April, up from -0.2% in March. Eurozone HICP is expected at 3% year-on-year in April, up from 2.6% in March.
Markets also await minutes from April’s Federal Reserve meeting. Rates were held, with one member backing a cut and three seeking removal of the “easing bias” line.
EUR/USD is down about 1.6% in just over a week, with RSI near 27 and MACD close to zero. Resistance sits near 1.1610 and 1.1650–1.1670, while support is at 1.1590 and then 1.1510–1.1525.
Looking back to this time last year, we remember the EUR/USD languishing at six-week lows near 1.1600 due to intense geopolitical pressure. Today, the situation has reversed, with the pair trading comfortably above 1.2200. The key difference is the de-escalation of the US-Iran conflict following the Hormuz Accords, which has removed a major headwind for the common currency.
The blockade of the Strait of Hormuz in 2025 pushed Brent crude above $108 a barrel, hammering Eurozone economies. With global shipping lanes now secure, Brent has stabilized and is currently trading around $83 a barrel. This sustained drop in energy costs has provided significant relief to the Eurozone, bolstering economic sentiment and the Euro’s strength.
Last year, we saw Eurozone inflation accelerating towards 3%, largely driven by the surge in energy prices. Data released last week shows the Harmonised Index of Consumer Prices (HICP) has cooled significantly to an annual rate of 2.4%, much closer to the European Central Bank’s target. This gives the ECB more policy flexibility compared to the Fed, which is now grappling with signs of a slowing US economy after hiking rates in late 2025.
Given this shift from high geopolitical tension to relative stability, implied volatility in EUR/USD options has compressed significantly over the past year. The Cboe EuroCurrency Volatility Index (EVZ) is trading near multi-year lows, a stark contrast to the elevated levels seen during the Hormuz crisis in 2025. Traders should consider strategies that benefit from this low-volatility environment, such as selling straddles or strangles, if they believe the current calm will persist.
We recall the technical picture in 2025 being firmly bearish, with key resistance around the 1.1650-1.1670 area. That level now acts as a distant memory, with current support established well above 1.2100. Long call options or call spreads could be attractive to capitalize on potential upside, especially if upcoming US economic data confirms a slowdown and points toward future Fed rate cuts.
