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Euro consolidates near late May highs as USD draws support from hawkish Fed, Iran risks

  • EUR/USD bulls turn cautious as the USD stabilizes amid hawkish FOMC Minutes and Iran risks.
  • Retreating US bond yields act as a headwind for the Greenback and lend support to the major.
  • September ECB rate hike bets underpin the Euro and back the case for further appreciation.

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 US Dollar (USD) stabilized following the previous day's US bond yields-led slump to a three-month low and turns out to be a key factor acting as a headwind for the EUR/USD pair. The fall in yields came after the US Treasury Department stepped in to provide relief to bond markets and said it would at least double purchases of longer-dated government debt from September in a bid to keep borrowing costs in check.

However, Minutes of the July 28-29 FOMC meeting showed that Federal Reserve (Fed) officials indicated the need to raise rates soon unless there was more progress on inflation. This comes on top of inflation risks stemming from higher oil prices and reaffirms market expectations that the US central bank will raise borrowing costs at least once in 2026. Furthermore, geopolitical risks underpin the safe-haven buck.

In the latest development, President Donald Trump said the US will launch the most crushing economic operation against Iran and threatened severe financial penalties on any nation that helps Tehran evade sanctions or does business with Iran. Moreover, the US and Iran remain deadlocked over the Strait of Hormuz. This keeps the war-risk premium in play, lending support to crude oil prices and the Greenback.

The downside for the EUR/USD pair, however, remains limited amid expectations for the continuation of the European Central Bank's (ECB) tightening cycle at its upcoming policy meeting in September. This might continue to act as a tailwind for the shared currency, validating the positive outlook for the EUR/USD pair. Traders now look to the US data for some impetus later during the North American session.

EUR/USD daily chart

Chart Analysis EUR/USD

Technical Analysis

The overnight breakout above a technically significant 200-day Simple Moving Average (SMA) and the 61.8% Fibonacci retracement level of the April-June decline were seen as key triggers for EUR/USD bulls. This backs the case for a further rise toward the 78.6% Fibo. retracement at 1.1733, ahead of the recent cycle high at 1.1845. On the downside, immediate support is seen at the 61.8% retracement at 1.1646, reinforced by the 200-day SMA at 1.1630, with deeper structural cushions at the 50.0% retracement at 1.1584 and the 38.2% retracement at 1.1523 if a corrective pullback unfolds.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Euro Price This Month

The table below shows the percentage change of Euro (EUR) against listed major currencies this month. Euro was the strongest against the US Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-1.28%-1.06%-0.60%-1.53%-1.26%-1.26%-0.63%
EUR1.28%0.21%0.65%-0.23%0.02%0.02%0.65%
GBP1.06%-0.21%0.47%-0.45%-0.21%-0.19%0.46%
JPY0.60%-0.65%-0.47%-0.88%-0.79%-0.84%-0.07%
CAD1.53%0.23%0.45%0.88%0.23%-0.19%1.00%
AUD1.26%-0.02%0.21%0.79%-0.23%0.03%0.66%
NZD1.26%-0.02%0.19%0.84%0.19%-0.03%0.65%
CHF0.63%-0.65%-0.46%0.07%-1.00%-0.66%-0.65%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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