EUR/USD Technical Analysis: Fragile Recovery Faces Geopolitical Risk

Market Overview

The EUR/USD pair is exhibiting a fragile recovery for the second consecutive session. While the pair maintains a position above the psychological 1.1300 support level and its May 2025 lows, the rebound remains characterized by limited momentum, warranting caution for market participants.

Geopolitical and Economic Drivers

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Geopolitical tensions in the Strait of Hormuz, following reports of an attack on a Singapore-flagged vessel, have renewed concerns regarding U.S.-Iran relations. This development has provided safe-haven support for the U.S. dollar, effectively capping upside potential for the euro.

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Simultaneously, U.S. dollar gains are being tempered by shifting Federal Reserve expectations. Market participants have adjusted their outlook on interest rate hikes, supported by the view that inflation may have peaked following a decline in global oil prices.

Technical Analysis

From a technical standpoint, the EUR/USD trend remains bearish. The pair has struggled to sustain a position above the 100-period Simple Moving Average (SMA) on the 4-hour chart, and the lack of strong bullish catalysts suggests that current recovery efforts remain vulnerable.

The Relative Strength Index (RSI) is currently tracking toward the 50 level, signaling a corrective move rather than a definitive trend reversal. Although the MACD displays moderately positive momentum, the overall structure remains under short-term pressure, positioning recent rallies as potential selling opportunities.

Outlook and Key Levels

Immediate resistance is identified at 1.1440. A decisive breakout above this level would be required to facilitate a retest of the 100-period SMA at 1.1512, which serves as a critical threshold to invalidate the existing bearish trend.

Failure to overcome these resistance levels keeps the pair susceptible to renewed downside pressure. In the absence of a confirmed bullish reversal, the EUR/USD remains at risk of testing new lows as market participants continue to monitor geopolitical developments and inflationary data.

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