EUR/USD in Turbulence: Market Questions When Conflict Over Iran Will End

Dollar's Safe-Haven Status Tested

The EUR/USD pair finds itself navigating a complex landscape, currently hovering around the 1.1608 mark. The US dollar is attempting to claw back losses from a sharp intraday drop experienced the previous day. This initial decline was triggered by growing expectations that the conflict involving Iran might see a quicker conclusion than initially feared, which temporarily lessened the demand for the dollar as a safe-haven asset.

Adding to this sentiment, US President Donald Trump indicated that the military operation in Iran is progressing faster than anticipated. Initial estimates had projected a timeline of four to five weeks. Trump also outlined plans to ease oil sanctions and deploy US Navy vessels to safeguard tankers transiting the Strait of Hormuz, a move aimed at keeping a lid on rising oil prices.

Previously, the dollar had enjoyed significant strength, fueled by its safe-haven appeal. The escalation of tensions in the Middle East, coupled with soaring energy prices, had stoked fears of prolonged economic instability and a resurgence of inflation.

Eyes on US Economic Data

Market focus is now pivoting towards upcoming macroeconomic releases from the United States. The February Consumer Price Index (CPI) is slated for release on Wednesday, followed by the January PCE index on Friday. Market observers anticipate that these data points may not yet fully reflect the conflict's influence on inflation expectations.

Technical Outlook for EUR/USD

Analyzing the H4 chart, the EUR/USD appears to be consolidating around the 1.1588 level. An upward movement is anticipated, potentially extending towards 1.1668. Subsequently, a renewed downward wave within the overarching trend is expected, targeting 1.1419 as an initial objective. The MACD indicator supports this bearish outlook; its signal line remains below zero and is trending downwards, suggesting sustained bearish momentum with the potential for further declines.

Shifting to the H1 chart, the market seems to be forming the structure of another growth wave directed toward the 1.1668 level. After this level is reached, a decline to 1.1419 is projected, followed by the beginning of a new upward wave toward 1.1650. The Stochastic oscillator lends credence to this scenario, with its signal line positioned below 50 and moving upwards toward the 80 level.

Reading Between the Lines for Traders

The EUR/USD's movements are clearly tethered to geopolitical currents. The prospect of de-escalation in the Iran conflict is currently eroding the dollar's safe-haven allure. However, technical indicators suggest that any upward momentum may be short-lived, with bearish forces poised to reassert themselves once the current corrective phase concludes.

Traders should closely monitor the forthcoming US inflation figures. These data will offer vital insights into whether the recent surge in energy prices is starting to impact consumer prices, which could ultimately shape expectations regarding Federal Reserve policy. Keep a close watch on the 1.1419 level as a key downside target, and 1.1668 as a potential resistance point.

Beyond the EUR/USD itself, related assets to watch include Brent Crude Oil, as further easing of sanctions could impact supply dynamics. Also, monitor the US Dollar Index (DXY), which will reflect broader dollar sentiment, and US Treasury yields, which will react to any shifts in inflation expectations and Fed policy.