EUR/USD Under Pressure Amid Geopolitical Tensions
EUR/USD edged lower in Tuesday’s Asian session, trading around 1.1633–1.1635 as the US Dollar firmed on concern the US-Iran talks could falter. US Central Command said US forces struck southern Iran on Monday, targeting missile launch sites and Iranian vessels seeking to deploy mines, although the military described the action as “defensive” and not intended to end the ceasefire with Tehran. The move supported the Greenback and lifted oil, with the US Dollar Index (DXY) marginally higher near 99.05. Separately, Bloomberg reported President Donald Trump said negotiations to end the conflict were “proceeding nicely”.
Technically, the pair retained a bearish near-term bias while holding below the 20-day Exponential Moving Average (EMA) at 1.1667. Momentum indicators were muted, with the Relative Strength Index (RSI) around 45.1, pointing to fading bullish traction rather than oversold conditions. Resistance remains at 1.1667, and a daily close above it would ease downside pressure and place 1.1700 in focus. A break below the May 21 low of 1.1576 could reopen losses towards 1.1500.
Geopolitical Risks and Diverging Economic Data Weigh on EUR/USD
We see the EUR/USD pair facing renewed selling pressure, currently trading around 1.0815. This dip is tied to a stronger US Dollar as geopolitical fears resurface over tensions in the South China Sea. This is a classic flight-to-safety move, benefiting the Greenback and weighing on riskier currencies.
This trend is also supported by diverging economic data between the United States and the Eurozone. Recent US CPI data showed inflation remains stubborn at 3.1%, reinforcing the Federal Reserve’s hawkish stance. In contrast, Eurozone inflation has cooled faster than expected to 2.2%, suggesting the European Central Bank may have more room to ease policy.
We have seen this pattern before, particularly during the 2022-2023 period when aggressive Fed rate hikes caused significant Dollar strength. The current policy divergence, while less dramatic, is creating a similar headwind for the EUR/USD. Traders should anticipate this fundamental pressure to persist in the coming weeks.
Technical Outlook and Trading Strategy
The pair’s position below its 20-day Exponential Moving Average at 1.0840 confirms a bearish near-term bias for us. With the Relative Strength Index hovering around 42, we see more room for downside before conditions become oversold. This technical setup suggests buying put options or establishing bear put spreads to speculate on a move towards the 1.0780 support level.
A daily close above the 1.0840 EMA is needed to ease the immediate selling pressure, but we believe significant resistance will be met near the 1.0900 level. A decisive break below the recent low of 1.0780 would likely accelerate the decline. Our next major target on the downside would then be the key psychological level of 1.0700.
