Euro consolidates near late May highs as USD draws support from hawkish Fed, Iran risks
The EUR/USD pair enters a bullish consolidation phase after touching its highest level since late May during the Asian session on Thursday. Bulls now await a move beyond the 1.1700 mark before placing fresh bets and positioning for an extension of an over a three-week-old uptrend.
The EUR/USD exchange rate stabilized near its highest level since late May as US Dollar (USD) strength gained traction due to hawkish Federal Reserve (Fed) signals and Iran-related risks. Investors await further gains beyond the 1.1700 mark before increasing positions. The US yielded a three-month low after the Treasury Department doubled purchases of longer-dated government debt and signaled rate hikes.
The Fed minutes revealed expectations of at least one rate increase in 2026, despite inflation pressures from higher oil prices, keeping market expectations of rate hikes alive. Geopolitical tensions between the US and Iran, particularly over the Strait of Hormuz, further bolstered the safe-haven dollar. The EUR/USD pair remained relatively protected due to the ECB's anticipated tightening cycle in September.
Traders watched for key technical triggers, including a breakout above the 200-day Simple Moving Average (SMA) and the 61.8% Fibonacci retracement level. Immediate support lay at the 61.8% retracement at 1.1646 and 200-day SMA at 1.1630, with further protection provided by the 50.0% retracement at 1.1584 and 38.2% retracement at 1.1523.
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