The euro strengthened further against the dollar on Tuesday, touching 1.1790, its highest level since the conflict in Iran began, before easing slightly below the 1.1800 mark. The pair has now risen for seven straight sessions, having pushed decisively through 1.1700 earlier in the day.
The move came as renewed expectations of diplomatic talks between Washington and Tehran improved risk appetite across markets and eased concerns over potential energy supply disruptions.
Euro reaches highest level since Iran conflict began
The euro’s advance reflected a broader improvement in market mood, with traders rotating into risk-sensitive assets on hopes that diplomatic channels could reduce geopolitical tensions and stabilize commodity markets.
Diplomatic progress supports risk sentiment
Reports suggesting that the United States and Iran are preparing for additional negotiations helped calm fears around oil flows and shipping routes, which had been strained after President Trump restricted Iranian port activity.
Late Tuesday, a State Department spokesperson confirmed that negotiators from both sides agreed to formally resume discussions in Geneva next week. This announcement further lifted risk-sensitive assets and underpinned the euro’s advance.
Sources indicated that the two countries had come close to a deal over the weekend but remained divided over uranium enrichment terms. Talks in Islamabad were suspended, yet both parties left the door open for a restart — a prospect now realized with the Geneva meeting.
Mixed central bank signals and US inflation data
The euro’s rally briefly stalled after comments from European Central Bank President Christine Lagarde at an International Monetary Fund gathering. She signalled the governing council could consider cutting policy rates as early as June if wage data continue to moderate, introducing a dovish tone for the eurozone outlook.
This hint of potential easing initially capped the single currency below 1.1800 as markets weighed the risk of a widening policy gap between the ECB and the US Federal Reserve.
However, fresh data from the US Bureau of Labor Statistics later shifted the balance. The Producer Price Index for March rose 0.2% month-on-month, below the 0.3% consensus and slowing from 0.6% in the previous month. The softer inflation reading pressured the dollar, allowing the euro to regain momentum despite the ECB’s cautious guidance.
According to the CME FedWatch Tool, markets now see about a 79% chance that the Federal Reserve will leave rates unchanged at its next meeting, while still pricing in at least two cuts before year-end.
European data add to euro’s underlying support
Eurozone data earlier in the day provided additional backing for the common currency.
- Germany’s Wholesale Price Index rose 4.1% year-on-year in March, up sharply from 1.2%, according to the Federal Statistics Office.
- Spain’s Harmonized Index of Consumer Prices edged up to 3.4% from 3.3%, slightly above expectations.
These figures reinforced the perception of firmer price dynamics in parts of the euro area, even as ECB officials signal growing openness to cuts if wage growth cools.
Technical picture: extended rally faces key resistance
In late European trade, EUR/USD hovered near 1.1794, maintaining a strong upward bias. On the four-hour chart, the relative strength index stood at 72, flagging overbought conditions, while the MACD histogram remained positive, confirming ongoing buying pressure.
Key technical levels now in focus:
- Resistance:
- 1.1825: first major cap, the level that halted gains in late February
- 1.1930: next upside target if 1.1825 is decisively cleared
- Support:
- 1.1720–1.1730: immediate support zone and focal point for near-term direction
- 1.1650: secondary support
- 1.1610: area around the March ascending trendline
Failure to break above 1.1825 could signal fatigue in the rally, especially with the RSI in overbought territory. A firm move below 1.1720–1.1730 would suggest that the ECB’s dovish tilt is starting to outweigh the positive impulse from the diplomatic front, potentially triggering a reversal of gains built over the past seven sessions.
Outlook: geopolitics and central banks pull in opposite directions
Traders are now watching for further remarks from Lagarde at the IMF meeting and any additional signals on the ECB’s rate path. At the same time, focus is turning to whether the Geneva talks between Washington and Tehran can deliver tangible progress before the weekend.
This creates a conflicting backdrop: an improving geopolitical narrative that favours risk-taking, set against a European central bank that is openly contemplating rate cuts. For those positioned in trends that rely on strong directional moves, the battle between these forces around the 1.1720–1.1730 support and 1.1825 resistance could determine whether the euro’s latest advance extends or unwinds.
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