|

Euro falls as USD gains on Iran optimism, Lagarde tempers ECB hawks

  • US-Iran optimism supports Dollar as safe-haven tensions ease.
  • Lagarde downplays second-round effects, trimming ECB tightening expectations.
  • PMIs, GDP and Core PCE headline next macro catalysts.

The shared currency registered losses of 0.37% against the US Dollar on Monday late in the North American session amid positive news on the US-Iran talks, while comments from ECB President Lagarde surprised investors, who played down second-round inflation woes. At the time of writing, the EUR/USD trades at 1.1428.

EUR/USD slips as Fed hike bets outweigh Lagarde’s inflation remarks

Optimism amongst investors boosted the Greenback as the US waived sanctions on Iran for 60 days, while US Vice President JD Vance said that negotiations laid a “good foundation” for a potential peace deal. Meanwhile, Iran denied talks about its nuclear program.

In the meantime, fighting over Lebanon is ending, following Iran’s threats to close the Strait, followed by US President Trump's response that he would resume attacks against Tehran if they shut Hormuz.

The lack of news flows in the US, and a scarce economic docket, left traders adrift on the Fed’s interest rate expectations. Last week, the US central bank shifted slightly hawkish, with nearly half of its members eyeing an interest rate increase.

Money markets see a 45% chance for a rate hike by the Fed at the July 29 meeting, according to Prime Terminal.

Some commercial banks, including Bank of America (BoFA) and Deutsche Bank, anticipate a US central bank rate increase at the September meeting. BoFA predicts three 25-basis-point hikes in 2026, scheduled for September, October, and December. Deutsche Bank, however, expects two 25-basis-point hikes, in September and December.

In Europe, the ECB President Lagarde said that the inflation shock “is too large to ignore,” adding that there’s no evidence of a “de-anchoring of inflation expectations or second-round effects that would jeopardise our target.”

Her comments were perceived as modestly dovish, with the key ECB rate not expected to exceed the bank's neutral range, seen at 1.75%-2.50%.

On Tuesday, the Eurozone docket will feature Flash PMIs in France, Germany and the bloc. In the US,

The upcoming US economic calendar includes S&P Global Flash PMIs and housing data. Thursday's schedule is packed with GDP figures for Q1 2026, the Fed’s preferred inflation measure, the Core Personal Consumption Expenditures (PCE) Price Index, and Initial Jobless Claims reports.

EUR/USD Price Forecast: Technical outlook

Chart Analysis EUR/USD
EUR/USD daily chart

In the daily chart, EUR/USD trades at 1.1428, extending its decline within a downward parallel channel and holding below the clustered simple moving averages (SMAs) around 1.1653, which reinforces a bearish near-term bias. The pair is trading beneath the former resistance trend line’s break zone near 1.1660 and remains capped well inside the channel, while the Relative Strength Index (RSI) at roughly 32 hovers near oversold territory, hinting that bearish momentum is stretched but not yet reversed.

On the topside, initial resistance emerges around the channel’s lower boundary extension near 1.1483, with a more important supply zone formed by the triple SMA cluster around 1.1653, the channel top at 1.1656 and the trend-line break level at 1.1660. If buyers were to overcome this dense band, the next notable barrier stands at the horizontal resistance level near 1.1849, where a larger corrective recovery would likely encounter renewed selling pressure.

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

Euro Price This week

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

USDEURGBPJPYCADAUDNZDCHF
USD-0.02%0.02%0.05%0.02%0.03%-0.01%0.00%
EUR0.02%-0.02%0.02%0.00%-0.00%-0.03%-0.00%
GBP-0.02%0.02%-0.06%0.02%0.00%-0.02%0.02%
JPY-0.05%-0.02%0.06%-0.04%0.03%0.18%-0.03%
CAD-0.02%-0.01%-0.02%0.04%0.06%0.22%0.02%
AUD-0.03%0.00%0.00%-0.03%-0.06%-0.04%0.02%
NZD0.00%0.03%0.02%-0.18%-0.22%0.04%0.02%
CHF-0.00%0.00%-0.02%0.03%-0.02%-0.02%-0.02%

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

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

More from Christian Borjon Valencia
Share:

Editor's Picks

AUD/USD consolidates near 0.7000 as USD stays weak

AUD/USD holds steady above 0.7000 during Thursday’s Asian session, consolidating the previous day’s recovery gains from a near three-week low as the Democratic sweep in the US midterm elections and Iran diplomacy hopes continue to weigh on the US Dollar. Bulls, however, seem hesitant as focus shifts to Friday’s crucial US NFP report.

USD/JPY drifts lower to 158.25 on hawkish BoJ Minutes, weak USD

USD/JPY trades with a negative bias for the second straight day on Thursday as hawkish BoJ Minutes, showing members agreed to keep raising rates, and intervention risks support the Japanese Yen. Meanwhile, US midterm election results and hopes for Iran diplomacy keep the US Dollar depressed as focus shifts to Friday’s US NFP report.

Gold pops to two-week highs near $4,150

Gold builds on Wednesday’s sharp rebound and flirts with the $4,150 mark per troy ounce on Thursday. The precious metal extends it recovery on the back of the irresolute price action of the Greenback and mixed US Treasury yields following the US midterms elections.

TRUMP token hits record low amid mounting selling pressure

Ripple and Stellar extend their recovery as bearish pressure begins to ease for both altcoins. XRP trades above $1.30 after breaking above the upper trendline of a falling channel pattern, while XLM holds above $0.168 and approaches resistance at $0.173. Meanwhile, improving derivatives metrics and strengthening momentum indicators hint at a potential for further recovery.

NFP stress test: Six payrolls releases, measured in daily-loss limits

Friday's US employment report is usually previewed in terms of the headline number and the reaction in the Dollar. For a growing group of traders, those running funded or evaluation accounts with a fixed daily loss limit, there is a more practical question: how much of that limit can the first hour consume, regardless of direction?

US Dollar breaks below 101.50 as Democrats sweep Congress
The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.