EUR/USD retreats as Israel-Iran conflict jolts markets, ends 4-day rally
- Euro hit hard despite stable EU inflation data as geopolitical tensions boost US Dollar.
- Israel’s strike on Iran triggers safe-haven flows into the Dollar; EUR/USD drops from 1.16 to 1.1488 intraday.
- Tehran cancels nuclear talks; risk sentiment deteriorates, overshadowing soft US inflation.
- Eurozone industrial output contracts sharply; German CPI steady at 2.1%, but French and Spanish inflation slip below ECB target.
EUR/USD ends four-day winning streak, prints losses on Friday as risk appetite takes a hit after Israel launched an attack on Iran, boosting the safe-haven appeal of the US Dollar (USD). At the time of writing, the pair trades around 1.1530, down 0.36%.
Sentiment shifted sourly after breaking news revealed Israel’s attack, which targeted Iranian militia officials, installations and nuclear facilities. Consequently, Iran retaliated, sending over a hundred drones and canceling the sixth round of nuclear negotiations, according to the Tehran Times.
On the headlines, the US Dollar appreciated against most G7 currencies, with the Euro being hardly damaged, as the pair hit 1.1488, down almost 0.80% in the day.
According to Reuters, US President Donald Trump said that it’s unclear if Iran still has a nuclear program. He said, “I tried to save Iran humiliation and death,” adding that he’s not concerned about a regional breakout.
Recently, data from the United States (US) revealed that consumers are growing more optimistic about the economy, according to the University of Michigan (UoM). Regarding inflation expectations, Americans are still seeing prices above the Federal Reserve’s (Fed) 2% target, despite inflation data released during the week increasing bets that the Fed could cut rates in 2025.
In the Eurozone (EU), German inflation figures for May remained unchanged at 2.1% YoY, as expected. Inflation in France and Spain remains below the European Central Bank (ECB) 2% target. Industrial production across the bloc plummeted in April, following a 2.4% growth in March, and came in at -2.4% YoY, which is below forecasts for a 1.7% contraction.
Daily digest market movers: EUR/USD dives on risk-off mood, boosting the Dollar
- Despite retreating, EUR/USD appears poised to resume its uptrend, as ECB officials have become slightly hawkish, and news that US-China talks could provide relief for investors. Nonetheless, an escalation of the Israel-Iran war exerts downward pressure on the pair.
- The University of Michigan Consumer Sentiment Index rose to 60.5 in June from 52.2, reflecting growing optimism among households. Inflation expectations eased, with the one-year outlook dropping from 6.6% to 5.1% and the five-year forecast ticking down from 4.2% to 4.1%.
- Next week, the US Federal Reserve (Fed) is expected to keep interest rates unchanged at the June 17-18 meeting. Traders had priced in the expectation that rates would remain unchanged, but what they’re eyeing is the update of the Summary of Economic Projections (SEP).
- Financial market players do not expect that the ECB would reduce its Deposit Facility Rate by 25 basis points (bps) at the July monetary policy meeting.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.29% | -0.28% | -0.66% | -0.74% | 0.12% | 0.00% | -1.28% | |
| EUR | 1.29% | 1.01% | 0.61% | 0.54% | 1.45% | 1.29% | -0.00% | |
| GBP | 0.28% | -1.01% | -0.31% | -0.47% | 0.44% | 0.28% | -1.01% | |
| JPY | 0.66% | -0.61% | 0.31% | -0.07% | 0.74% | 0.61% | -0.74% | |
| CAD | 0.74% | -0.54% | 0.47% | 0.07% | 0.86% | 0.75% | -0.54% | |
| AUD | -0.12% | -1.45% | -0.44% | -0.74% | -0.86% | -0.15% | -1.43% | |
| NZD | 0.00% | -1.29% | -0.28% | -0.61% | -0.75% | 0.15% | -1.28% | |
| CHF | 1.28% | 0.00% | 1.01% | 0.74% | 0.54% | 1.43% | 1.28% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Technical outlook: EUR/USD hovers below 1.1550 as US Dollar stages a comeback
The EUR/USD uptrend remains in place as the pair has printed a successive series of higher highs and higher lows. In addition, momentum remains bullish, as indicated by the Relative Strength Index (RSI), which remains above its neutral 50 level despite aiming downwards.
That said, the first resistance for EUR/USD is 1.1550. A breach of the latter will expose 1.16 and the year-to-date (YTD) peak of 1.1631. Once surpassed, 1.17 is up next. Conversely, if EUR/USD remains below 1.1550, expect a pullback towards 1.15. Once cleared, the next stop would be 1.1450, followed by the 20-day Simple Moving Average (SMA) at 1.1386.
