The euro (EUR) gained against the US dollar (USD) again on Monday, marking the second day of an upward trend. This comes as investors felt cautiously optimistic about the possibility of a positive development from discussions between the US and Iran. Although Germany’s GfK consumer sentiment data fell short of expectations, its effect on the euro has been relatively limited so far.
In the latest GfK survey for May, consumer confidence plunged to -33.3, the lowest reading in over three years, down from -28.1 in April, and actually worse than the anticipated -29.5.
Still, the main attention seems to be on the Middle East. An Axios report, referencing a US official and two sources familiar with the ongoing peace talks, suggested that Iran has proposed a new peace plan to the US. This proposal could lead to a ceasefire, the reopening of the Strait of Hormuz, and a delay in nuclear negotiations, providing a glimmer of hope.
However, peace talks remain stalled. A second negotiation round planned for the weekend was canceled, tanker traffic in Hormuz has been blocked for two months, and oil prices are approaching $100 per barrel, raising fears of a potential recession.
Investors are also expected to monitor economic developments closely this week. The US Federal Reserve (Fed) and the European Central Bank (ECB) are set to announce monetary policy decisions on Wednesday and Thursday, respectively. While both are predicted to maintain steady interest rates, rising inflation pressures may prompt the ECB to hint at a possible rate hike in the coming months.
Technical analysis: EUR/USD remains constrained below the countertrend line
The EUR/USD pair has seen some support between levels of 1.1645 and 1.1675 recently, allowing it to regain some ground lost last week, moving above 1.1700. But there are challenges ahead as it struggles to break through resistance just above 1.1730 (the low from April 19), which lies beyond the broken trend line around 1.1745.
On the 4-hour chart, indicators provide a slightly bullish outlook. The Relative Strength Index (RSI) sits close to 50, indicating neutrality, while the Moving Average Convergence Divergence (MACD) has shown a slight uptick, hinting that bearish momentum is slowing. Still, it’s not strong enough to outweigh the overhead supply.
For the bulls to confirm an upward trend, they need to push past the trendline at 1.1745. If they succeed, attention could shift to the high of 1.1760 recorded on April 22 and the peak from April at 1.1849. Conversely, if a bearish move happens, support may be found between 1.1745 and 1.1755, where the pair held several times in mid-April. Further declines could target the lower boundary set in April, between 1.1505 and 1.1525.
