EUR – Dollar remains stable as tensions between Israel and Iran escalate

The dollar remains stable near recent highs. The Federal Reserve kept its benchmark overnight interest rate target range unchanged at 4.25%-4.50% last Wednesday, as widely expected by the market. Policymakers hinted that borrowing costs could still fall this year, but Chairman Powell warned against overestimating this forecast and said he expected "quite high" inflation from tariffs imposed by the Trump administration. Investors expect the Federal Reserve to cut interest rates by 25 basis points twice this year, which is in line with the median forecast of Fed policymakers. Interest rate futures traders are basically betting on a rate cut between September and October and another rate cut in December. What is more shocking to the market is that the threat of conflict in the Middle East still looms over the market, with Iran and Israel launching further air strikes against each other. Just on Sunday, Trump announced an attack on Iran's nuclear facilities, and market risk aversion may rise significantly in the short term, especially paying attention to potential retaliation from Iran. Under the influence of external global risk events such as the escalation of conflict in the Middle East, the dollar may regain support.

The euro has been rising against the dollar since February, forming an upward trend line on the technical chart, and has formed support at 1.1430 so far. It was close to this area just last Thursday, but it can still hold for the time being; so it is necessary to pay attention that if the euro further loses the trend line support, the selling pressure may increase significantly. Calculated from the cumulative increase of 1.1064 on May 12, the adjustment range of 50% and 61.8% is 1.1275 and 1.1225. The subsequent support will refer to the 1.1060 and 1.10 levels. The resistance level is estimated at 1.1550 and 1.1630, and then points to the 1.17 to 1.18 level.

Forecast range:
Resistance 1.1550 - 1.1630 - 1.1700 – 1.1800
Support 1.1430* – 1.1275 – 1.1225 – 1.1060 – 1.1000
Focus:
Monday:
Eurozone June PMI

Tuesday:
Germany June IFO Business Climate Index (14:00)

Thursday:
Germany July GfK Consumer Confidence Index (14:00)

Friday:
Eurozone June Business Climate Index, Consumer Confidence Index Final Value (17:00)

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