The euro stayed firmly above 1.1800 against the U.S. dollar on Thursday, extending a nine-day winning streak as easing geopolitical tensions in the Middle East reduced demand for the greenback as a safe-haven currency. The EUR/USD pair is now trading near levels last seen before the recent regional conflict.
Fresh optimism followed U.S. President Donald Trump’s confirmation that indirect talks with Iran are under way and could resume within days. He also said Israel and Lebanon plan to open direct negotiations, raising hopes for broader regional stability and adding to pressure on the dollar.
Political pressure on the Federal Reserve adds to dollar uncertainty
The dollar’s outlook was further clouded by renewed friction between the White House and the Federal Reserve. Trump said he may remove Fed Chair Jerome Powell from his leadership role if Powell does not step down by May 15. Powell’s term as chair ends next month, but his seat on the Fed’s Board of Governors runs through 2028.
The remarks introduce political uncertainty around future U.S. monetary policy, potentially weighing on the dollar regardless of geopolitical developments. The dispute could also complicate the timing of any Senate confirmation process for a successor, heightening the risk of a temporary policy vacuum.
Technical picture: euro uptrend shows momentum but faces resistance
Short-term technical signals continue to favor the euro, though signs of fatigue are emerging:
- The Relative Strength Index (RSI) sits near 66, indicating moderate bullish momentum but approaching overbought territory.
- The Moving Average Convergence Divergence (MACD) indicator has slipped slightly into negative territory, suggesting the rally may be losing some steam.
Key levels for EUR/USD:
- Resistance is clustered near 1.1825, with a break above this zone opening the way toward February highs around 1.1930.
- Initial support lies just above 1.1770, followed by 1.1720–1.1740.
- Deeper structural support is seen around 1.1650; a sustained move below that area would challenge the current upward trend.
Geopolitics keeps headline risk high
While the latest ceasefire extension and diplomatic efforts have driven dollar weakness, the situation remains fragile. Any setback in talks between Washington and Tehran, or deterioration in Israel–Lebanon discussions, could quickly revive safe-haven demand for the dollar and reverse recent gains in the euro.
Market participants remain sensitive to headlines, with the currency pair vulnerable to sharp intraday swings if negotiations stall or rhetoric hardens.
Eurozone fundamentals underpin the currency
Beyond geopolitics, the euro’s path is being shaped by domestic data and the region’s policy framework.
The euro is the world’s second most traded currency, representing about 31% of all foreign exchange transactions in 2022, with average daily turnover above $2.2 trillion. The EUR/USD pair alone accounts for roughly 30% of global FX activity, followed by EUR/JPY at 4%, EUR/GBP at 3%, and EUR/AUD at 2%.
The European Central Bank (ECB), based in Frankfurt, oversees monetary policy for the 20-country Eurozone, targeting inflation around 2%. Interest rate decisions remain its main tool for steering economic conditions in the bloc.
Key macroeconomic releases—particularly GDP, inflation, and trade data from Germany, France, Italy, and Spain, which together generate about three-quarters of Eurozone output—continue to influence the euro’s direction. Stronger figures from these core economies tend to support the currency.
Mixed but improving data from major Eurozone economies
Recent data present a cautiously optimistic backdrop:
- France reported inflation at a 14‑month high of 1.7% in March, driven largely by a rebound in energy prices, signaling firmer price pressures.
- Germany posted a 0.3% month-on-month decline in industrial production for February, an unexpected setback.
- However, Eurozone-wide factory output rose 0.4% in the same month, suggesting that weakness in Germany was partly offset by strength elsewhere in the bloc.
These mixed signals limit the scope for aggressive ECB tightening but are broadly consistent with a modest growth recovery, helping to underpin the euro against the dollar.
Wider market context: weaker dollar aligns with firm crypto prices
The current phase of dollar softness overlaps with a period of consolidation in digital asset markets. Total cryptocurrency market capitalization is holding near $3.5 trillion.
Historically, a weaker dollar has often coincided with resilience in alternative assets. Bitcoin has established support above $73,000, with technical charts pointing to potential resistance in the $75,000–$76,000 band. Continued institutional participation could keep a floor under prices if the dollar’s downtrend persists.
Outlook
The euro’s sustained move above 1.1800 reflects a combination of improving risk sentiment on Middle East diplomacy, political noise around U.S. monetary policy, and a still-supportive Eurozone backdrop.
However, headline risk remains elevated. A breakdown in regional talks or an escalation in the Fed leadership dispute could quickly alter the balance, putting recent euro gains to the test around the identified support zones. Traders are likely to focus on upcoming geopolitical developments, Fed-related signals, and key Eurozone data for confirmation of the current trend.
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