EUR/USD edged higher on Monday after bouncing from near 1.1600, but remained capped below the 1.1650–1.1670 resistance zone. Cautious trading and high oil prices continued to limit the euro’s gains.
A spokesperson for Iran’s Foreign Ministry said Washington and Tehran would review a peace proposal delivered by Pakistani mediators. The spokesperson also said Iranian and Omani technical teams discussed restoring safe passage through Hormuz last week, and oil prices eased from recent highs.
Geopolitical Tensions And Oil In Focus
Earlier, US President Donald Trump said “the clock is ticking” on Tehran after meeting his national security team. He also spoke with Israeli Prime Minister Benjamin Netanyahu about options in Iran.
UOB Bank expects further downside, with attention on 1.1570 if 1.1600 breaks. The bank keeps a negative view while the pair remains below “strong resistance” at 1.1685.
Technically, the pair stayed below resistance at 1.1650–1.1675 as the 4-hour MACD remained negative. RSI rebounded from oversold levels, while resistance is seen above 1.1660 and near 1.1720.
Support was noted near 1.1610, with little support before 1.1505–1.1525.
Macro Backdrop And Trading Implications
The Euro’s attempts to push higher are facing strong resistance, keeping the pair below the 1.0800 level. Cautious market sentiment, driven by high energy prices, is keeping any bullish momentum in check. We are seeing a similar pattern to what we observed in 2025 when geopolitical flare-ups strengthened the dollar.
Recent data showing US inflation holding at 3.1% contrasts sharply with the Eurozone’s dip to 1.8%, reinforcing the Federal Reserve’s hawkish stance. With Brent crude staying above $95 a barrel, the pressure on Europe’s energy-importing economy continues to build. This divergence suggests the path of least resistance for the EUR/USD is downwards.
We only have to look back to the energy crisis of 2022 to see how a similar setup pushed the EUR/USD below parity for the first time in two decades. The current combination of high energy costs and a hawkish Fed creates a familiar headwind for the Euro. This historical precedent suggests that traders should be wary of any small bounces.
For the coming weeks, we see value in buying put options with strike prices around 1.0650 and 1.0500. This provides downside exposure while capping the maximum risk to the premium paid. More conservative traders could consider selling out-of-the-money call spreads above the 1.0850 resistance level to collect premium from the view that upside is limited.
Our bearish outlook remains intact as long as the pair holds below the strong resistance at 1.0850. A decisive break above this level would signal a shift in momentum and would be our cue to reassess these positions. Downside momentum could accelerate on a break below 1.0700, opening the door for a test of the 1.0570 area.
