EUR/USD faced continued pressure on Wednesday, hovering around 1.1629. The dollar found support due to stalled discussions between the U.S. and Iran, along with renewed tensions in the Middle East, which heightened demand for safe-haven assets.
U.S. Central Command reported that Iran launched a ballistic missile towards a neighboring country, prompting U.S. forces to target locations on Qeshm Island in retaliation for suspected Iran-linked attacks.
This ongoing conflict has led to a spike in energy prices, raising inflation concerns and the possibility that interest rates might stay elevated longer than anticipated.
U.S. labor market data bolstered the dollar further. Job openings increased in April to their highest level in nearly two years, while layoffs decreased, according to data released on Tuesday. This suggests the U.S. economy remains resilient amid ongoing geopolitical and economic uncertainties.
Investors are now looking ahead to the ADP report, which might shed more light on the labor market’s conditions.
Nonetheless, the main focus this week is Friday’s nonfarm payroll report, which could provide significant insights into the Fed’s future policy direction.
Technical Analysis
In the second half of the year, the EUR/USD chart shows the pair trading within a consolidating range around 1.1635, currently fluctuating between 1.1605 and 1.1654, with a likely dip towards 1.1585. The MACD indicator backs this outlook, as its signal line rests below zero and is trending downward.
In the first half chart, EUR/USD peaked at 1.1655 and seems to be sliding towards 1.1585, with a potential corrective bounce back to 1.1636 before another drop to 1.1555. The Stochastic Oscillator supports this view, displaying its signal line near the 50 level and angled down towards 20.
Conclusion
EUR/USD continues to experience downward pressure due to geopolitical tensions and favorable U.S. labor market data backing the dollar. Traders are likely to remain cautious as the ADP report and Friday’s nonfarm payroll release draw near. Technical indicators also hint at a likelihood of further short-term weakness for the currency pair.
