EUR/USD Falls Again as Middle East Uncertainty Supports Dollar

Traders' Opinions

Summary:

EUR/USD slipped for a second straight session on Friday as lingering uncertainty surrounding US-Iran negotiations boosted cautious market sentiment, overshadowing stronger-than-expected German economic data and keeping the Euro under pressure.

SELL EURUSD

EXP

TRADING

1.16000

Entry Price

1.15200

1.16650

1.16129 -0.00038 -0.03%

0.0

Pips

Flat

1.15200

Exit Price

1.16000

Entry Price

1.16650

The Euro edged lower against the US Dollar on Friday, marking its second consecutive daily decline and placing the common currency on course for a second straight weekly loss, as investors remained focused on geopolitical uncertainty in the Middle East despite encouraging economic signals emerging from Germany.

EUR/USD traded cautiously throughout the European session, with broader market sentiment continuing to favor the relative safety of the US Dollar as uncertainty surrounding negotiations between Washington and Tehran kept investors reluctant to aggressively re-enter risk-sensitive positions.

While hopes for a diplomatic breakthrough between the United States and Iran remain alive, confidence in a near-term resolution remains fragile. Tehran is still reviewing the latest proposal submitted by the United States, and market participants remain sceptical given the substantial disagreements that continue to surround Iran’s nuclear ambitions and future control over the strategically critical Strait of Hormuz.

Comments from US Secretary of State Marco Rubio helped prevent a deeper deterioration in market sentiment after he acknowledged that “some progress” had been made in negotiations with Tehran. However, traders appear increasingly aware that the path toward a finalized agreement remains highly uncertain and vulnerable to sudden reversals.

From my perspective, the market’s reaction highlights the broader exhaustion among investors after weeks of conflicting geopolitical headlines. Traders are no longer responding aggressively to optimistic rhetoric alone and instead appear to be demanding concrete developments before materially reducing defensive US Dollar exposure.

That cautious tone continued to weigh on the Euro even as Germany released a surprisingly resilient set of macroeconomic figures earlier in the day. Revised data confirmed that the German economy expanded by 0.3% during the first quarter, matching the pace recorded during the final quarter of 2025 and easing concerns that Europe’s largest economy was slipping toward stagnation.

More importantly, annualized GDP growth was revised higher to 0.4% from the initially estimated 0.3%, suggesting that domestic demand and industrial activity may be holding up better than many analysts previously anticipated despite ongoing geopolitical stress and elevated energy costs.

Additional support for the Euro came from the latest survey data published by the CESifo Group. Germany’s closely watched IFO Business Climate Index improved to 84.9 in May from a revised 84.5 in April, outperforming market expectations that had pointed toward further deterioration.

The improvement was broad-based, with both the assessment of current economic conditions and expectations for the next six months rising more strongly than forecast. The data offered a degree of reassurance that German businesses are adapting more effectively to external shocks than feared, even as tensions in the Middle East continue to threaten global supply chains and energy markets.

Ordinarily, such data would likely have provided a stronger tailwind for the Euro. However, geopolitical developments continue to dominate broader market positioning, particularly as investors assess the potential inflationary and growth implications of prolonged instability around the Strait of Hormuz.

The risk of disruptions to global energy flows remains a major concern for European economies, which remain heavily exposed to fluctuations in imported energy prices. Any renewed escalation in the region could significantly complicate the European Central Bank’s policy outlook by simultaneously pressuring growth while keeping inflation elevated.

Meanwhile, the US Dollar has continued to benefit from resilient Treasury yields and growing expectations that the Federal Reserve may maintain restrictive monetary policy conditions for longer than previously anticipated. Sticky inflation pressures in the United States, particularly those linked to energy costs, have pushed traders to scale back expectations for rate cuts while reviving speculation about the possibility of further tightening.

That policy divergence continues to provide underlying support for the Greenback and is limiting the Euro’s ability to capitalize on improving domestic fundamentals.

Technical Analysis

EUR/USD remains under sustained bearish pressure on the 4-hour chart, with the pair extending its sequence of lower highs and lower lows after failing to sustain momentum above the 1.1780 resistance region earlier this month. The broader market structure has deteriorated significantly over recent sessions, with sellers maintaining firm control following a decisive breakdown below several key support zones that previously underpinned the bullish trend.

Price action is now consolidating near the 1.1600 psychological handle after a sharp multi-day decline from the 1.1780 area. The recent rebound attempts toward the 1.1620–1.1630 resistance zone have repeatedly failed to attract meaningful follow-through buying, suggesting bearish momentum remains dominant despite short-term stabilization. This area now represents a critical near-term barrier, having shifted from previous support into resistance following the breakdown.

The pair’s inability to reclaim territory above 1.1630 reinforces the likelihood of another bearish continuation move toward the next major downside target near the 1.1520 support region. A sustained break below the current consolidation floor around 1.1580 would likely accelerate downside momentum and expose deeper losses toward 1.1520, where buyers may attempt to re-enter the market. That zone also represents a significant technical support area visible on the broader structure.

Should EUR/USD decisively break beneath 1.1520, the bearish outlook would strengthen further and potentially open the door toward the 1.1500 psychological level, followed by deeper downside exposure toward the late-April lows. Such a move would confirm a broader trend reversal rather than a temporary corrective decline.

On the upside, bullish traders would need to reclaim the 1.1630 resistance area convincingly before any meaningful recovery scenario can develop. A sustained move above that barrier could trigger short-covering toward 1.1660 and potentially the 1.1720 zone, where stronger resistance is positioned. However, based on the current structure, rallies continue to appear corrective rather than trend-changing.

Momentum studies continue to favor the downside. The Relative Strength Index (RSI) remains subdued below the neutral 50 threshold, indicating that bearish momentum still dominates despite occasional recovery attempts. At the same time, the Moving Average Convergence Divergence (MACD) remains in negative territory and continues to reflect weakening bullish participation, reinforcing expectations for further downside pressure in the sessions ahead.

From a broader perspective, the pair remains vulnerable while trading below the former support-turned-resistance region near 1.1630. Until buyers regain control above that level, the technical outlook continues to favor sellers, particularly as the US Dollar benefits from stronger Treasury yields and persistent expectations of restrictive Federal Reserve policy.

TRADE RECOMMENDATION

SELL EUR/USD

ENTRY PRICE: 1.1600

STOP LOSS: 1.1665

TAKE PROFIT: 1.1520

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EUR/USD Falls Again as Middle East Uncertainty Supports Dollar

Technical Analysis

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