On Tuesday, the euro (EUR) declined against the US dollar (USD) for the third straight day. It was trading at 1.1685 as investors reacted to growing concerns over renewed tensions in Iran, which have diminished risk appetite. Attention is also shifting toward a speech by European Central Bank President Christine Lagarde.
On Monday, US President Donald Trump’s decision to allow a ship trapped in the Strait of Hormuz to leave stirred up quite a bit of tension. Reports indicated that at least one vessel crossed the strait under US military escort, while several others experienced fires and explosions. Additionally, Iranian missiles were said to have hit an oil port in the United Arab Emirates (UAE), where a military base is situated.
The recent clashes have made investors cautious about a potential escalation of conflict, contributing to oil prices remaining above the $100 mark. At the time of writing, U.S. West Texas Intermediate (WTI) was priced at $101.40, and Brent crude was at $111.58, getting close to a four-year peak of $114.30. Such high prices are putting financial strain on eurozone oil-importing nations and applying downward pressure on the euro.
Christine Lagarde is expected to address the public in Frankfurt later today, likely shedding more light on the central bank’s plans for monetary tightening, especially after multiple calls for possible interest rate hikes in June or July.
In the U.S., the day’s focus will be on the S&P Global Services Purchasing Managers’ Index (PMI) and ISM Services PMI, ahead of the April jobs report set to be released later this week.
Technical analysis: Bears eye support zone at 1.1645-1.1675
The EUR/USD pair is exhibiting increasing bearish momentum, with price action nearing the support area between 1.1645 and 1.1675, showing multiple attempts to decline throughout April.
Momentum indicators have dropped deeper into bearish territory. For instance, the 4-hour Relative Strength Index (RSI) has slipped to about 40, and the Moving Average Convergence Divergence (MACD) is in negative territory, reflecting a predominantly bearish environment.
Nonetheless, the bears might require additional momentum to break past the support area above 1.1645. A confirmed drop below that level could trigger a bearish head and shoulders pattern, setting a target just below the April low around 1.1500.
On the upside, Friday’s low at 1.1715 may serve as resistance, along with the highs from April 20 and May 1 ranging between 1.1785-1.1795, and the April 17 peak near 1.1850.
