The euro rose 0.37% on Monday, with EUR/USD trading at 1.1645, as markets weighed renewed hopes of a US-Iran agreement to extend a ceasefire by 60 days and open talks on Iran’s uranium enrichment programme. US equity futures moved higher while the US Dollar Index (DXY) slipped 0.33% to 98.99, after finishing last week almost flat. Oil prices also fell hard, with West Texas Intermediate down nearly 5.50% to $91.66 a barrel, as trading remained thin with holiday-emptied economic calendars in both the Eurozone and the US.
Policy signals and rates pricing stayed in focus. Germany’s Ifo survey showed improved sentiment but a weak outlook, while the European Commission projected Eurozone growth slowing to 0.9% in 2026 from 1.3% last year and inflation rising to 3% from 1.9%, above the ECB’s 2% target. Money markets have priced two ECB rate rises by year-end; Prime Terminal data show a 77.64% probability of a first move at the 11 June meeting. On the charts, EUR/USD sits below the 1.1658 SMA cluster, with support at 1.1573 and 1.1271 and resistance near 1.1813; the RSI stands at 46.
Euro Momentum and Underlying Drivers
We are seeing the Euro push higher against the dollar today, hitting 1.1645 as hopes for a US-Iran ceasefire deal weaken the greenback. The prospect of renewed Iranian oil supply has sent crude prices tumbling nearly 5.5%, further pressuring the dollar. This shift in sentiment is giving us a clear, albeit possibly temporary, direction for the single currency.
Our focus is on the European Central Bank’s increasingly hawkish tone, which supports a stronger Euro. With preliminary German HICP inflation data for May recently coming in at 3.2%, above the expected 3.0%, the market’s pricing of a 77% chance for a rate hike on June 11 seems justified. This contrasts with the Eurozone’s projected economic slowdown to 0.9% growth, creating a complex backdrop for monetary policy.
The dollar’s weakness may be short-lived, as we are heading into a week heavy with key U.S. data. All eyes will be on the upcoming Core PCE Price Index, the Fed’s preferred inflation gauge, which came in at 2.9% last month. An upside surprise here could quickly reverse the dollar’s losses and cap the Euro’s rally.
Strategy and Risk Management Approaches
Given the technical resistance near the 1.1658 level, we feel this is not the time for outright spot positions. The current situation, with geopolitical news driving sentiment against a backdrop of crucial economic data, calls for using options to manage risk. The implied volatility reminds us of the sharp market turns seen during the 2022 central bank tightening cycles.
Therefore, we are looking at buying short-dated EUR/USD call options with a strike price just above the 1.1660 resistance to play a potential breakout. To hedge this, we will also consider purchasing puts to protect against a sharp reversal should the U.S. inflation or jobs data come in hotter than expected. This strategy allows us to participate in the upside while defining our risk to the premium paid.
