Insights 
VT 
Key Points
- EUR/USD eases to $1.153 after peaking at $1.16316
- ECB signals pause, while Fed rate cut bets rise amid soft U.S. inflation
The euro retreated to $1.15329 on Friday, cooling off after hitting a three-and-a-half-year high of $1.16316 on Wednesday. The reversal comes as markets absorb the shock of Israel’s latest military strike on Iranian nuclear sites—an attack that killed key figures and sparked a barrage of retaliatory drone launches from Tehran. The heightened geopolitical tension triggered a global flight to safety and weakened appetite for risk-linked currencies, including the euro.
Despite the pullback, the euro remains fundamentally underpinned by recent signals from the European Central Bank. Officials have hinted at a potential pause in the easing cycle, as they assess the economic fallout from newly imposed U.S. tariffs. The prospect of policy stability—against a backdrop of inflation resilience in core eurozone economies—has attracted investors seeking currency alternatives to the dollar.
Meanwhile, the U.S. dollar has come under pressure. Soft CPI data earlier in the week coupled with trade uncertainty from President Trump’s tariff strategy has fuelled speculation that the Federal Reserve could begin cutting rates as early as September. This divergence in monetary policy outlooks has widened interest rate differentials, offering a degree of support for the single currency.
However, escalating conflict in the Middle East and its potential ripple effects on global growth, inflation, and risk sentiment may limit the euro’s upside in the near term. Traders appear to be rotating into safe-haven currencies, with renewed demand for the Swiss franc and Japanese yen.
Technical Analysis
The pair rallied from around 1.1480 to a high near 1.1630 earlier, with steep MACD histogram expansion and a bullish mid‑term moving average crossover confirming strong momentum. However, resistance emerged at the 1.1630 zone, coinciding with the ECB’s June 5 rate cut, which sparked a sharp reversal. The MACD lines turned downward and a shallow correction ensued, pulling price back toward the 1.1540–1.1550 level. That area has acted as intraday support so far, and the MACD histogram is starting to flatten—suggesting consolidation rather than a full reversal.
Picture: EUR/USD reverses off ECB‑driven high, eyes support at 1.1540, as seen on the VT Markets app
From a broader perspective, the European Central Bank’s recent 25bp rate cut to 2% marks the eighth easing move this cycle. The dovish policy and weakened eurozone fundamentals (slowing growth, below-target inflation) pressured EUR/USD higher initially on speculation the Fed would lag, but this quickly reversed as markets digested the implications of diverging interest rate paths.
Unless tensions de-escalate or U.S. data continues to underwhelm, EUR/USD could consolidate within the 1.148–1.158 range in the short term. Markets are also closely monitoring further ECB commentary, with any firm signal on policy normalisation likely to provide renewed directional cues for the euro.
