Geopolitical tensions between the United States and Iran have recently been the key driver of EURUSD dynamics. When the atmosphere heats up, demand for the US dollar as a safe haven tends to rise. At the same time, higher crude prices fuel inflation risks on both sides of the Atlantic. However, news of a temporary de-escalation has just hit the headlines, making the greenback less attractive and pushing oil costs lower. This is a positive short-term factor for the euro, as the threat of another energy shock in the eurozone has receded. Compared to the US, the region is far more dependent on crude prices. The bloc’s inflation jumped to 3.20% in May, leaving the European Central Bank caught between a rock and a hard place. This week, the ECB raised interest rates to 2.40%.
Today’s Federal Reserve meeting is of particular interest to market participants, as its policy decision will have a significant impact on EURUSD. The American regulator’s posture looks firmer than the ECB’s. The Fed’s borrowing costs are currently sitting at 3.75%, and the central bank shows no intention to ease monetary conditions amid sticky inflation and resilient employment figures. If the June meeting confirms the US regulator’s hawkish stance and the “higher for longer” scenario, the dollar will gain extra support, weighing on EURUSD. Greater-yielding, dollar-denominated assets are likely to draw investor attention and limit the euro’s upside. In case the Fed takes a more dovish turn and signals rate cuts in the coming years, the greenback could weaken, offering the pair a solid chance to recover. Therefore, today’s outcome will serve as an important near‑term catalyst for prices.
The final recommendation:
— Buy EURUSD at the current price, targeting 1.16850 within a week.
— Place Stop Loss at 1.15000, just below support, to manage risks if the market moves against us.
This content is for informational purposes only and is not intended to be investing advice.
