Bullish momentum in EURUSD weakens near six-week high

EURUSD is currently hovering around 1.17878, clinging to six-week highs. The pair’s recent rally was driven by peace talks between the United States and Iran, which triggered a sell-off in the dollar and a shift of capital into riskier assets. However, today’s early trading showed signs of the greenback’s recovery, as the market started to take profits.

The temporary truce still lacks conviction. The two sides failed to reach an agreement during their weekend negotiations in Islamabad. Next week, the ceasefire is set to expire, yet the Strait of Hormuz remains blocked. The date of a new meeting is unknown. Any deterioration in the diplomatic climate could drive investors back to the US dollar as a reliable safe haven.

The European Central Bank’s (ECB) policy stance only adds to the single currency's woes. The regulator is caught between a rock and a hard place. On the one hand, officials have to curb stubborn inflation; on the other, they must reduce the threat of stagnation. ECB Governor Christine Lagarde said that the region’s economy is likely to follow either a baseline or a negative scenario. She gave no hints about rate hikes, disappointing the central bank’s committed hawks. As a result, German bond yields have fallen from their peaks, while spreads in peripheral countries are widening, signaling rising risks for the eurozone. According to the International Monetary Fund (IMF)—which forecasts a slowdown in GDP growth to 1.1%—if the CPI accelerates to 2.6%, stagflation seems inevitable. Historically, the euro has faced its worst moments under such conditions.

From a technical perspective, bullish momentum is clearly fading on the daily chart following the pair’s trouble-free rally from April 6 (from 1.15045 to 1.18103). After hitting a local peak, prices retreated slightly during today’s early trading, forming a red candlestick as profit-taking by bulls set in. The Stochastic Oscillator sits in overbought territory, signaling overheated conditions and a high probability of a pullback toward the nearest Fibonacci support levels (23.6% at 1.17385 and 38.2% at 1.16935).

Consider the following trading strategy:

Sell EURUSD at the current price. Place Take profit at 1.16935. Set Stop loss at 1.18400.

The forecast is valid from April 15 till April 22, 2026.