Insights 
VT 
The EUR/USD pair is experiencing minor gains after a previous decline. Escalating Middle East tensions, combined with global trade uncertainty and rising Oil prices, are restricting upside potential.
The Euro’s recovery from recent lows has stalled around the 1.1500 level, nearly 1% below last week’s highs. Continued conflict between Israel and Iran, with the US adopting a firmer stance, keeps market sentiment weak.
European Inflation Data
Recent European inflation data points to slower price pressures, failing to bolster the Euro. Increased US involvement concerns have heightened demand for safe-haven assets, particularly the US Dollar.
Crude prices recently surged over $3, nearing $75, impacting the Eurozone’s growth prospects. Anticipation surrounds the Federal Reserve’s monetary policy decision, expected to maintain steady interest rates.
The Euro’s performance varies against major currencies, strongest against the Swiss Franc today. Geopolitical tensions rise as the Israeli military continues actions against Iran, with warnings from the Iranian government over US involvement.
Recent Eurozone data shows flat monthly inflation in May, slowing annual inflation to 1.9% from 2.2%. Futures markets foresee potential Fed rate cuts, possibly in September.
Technical Analysis On EUR/USD
Technical analysis shows EUR/USD struggles post-triangle pattern break, attempting a bounce above 1.1500. The Federal Reserve’s interest rate decision and FOMC outlook shifts are key to the US Dollar’s trajectory.
While the EUR/USD pair finds some footing after recent declines, the broader context tilts in favour of caution. The market is leaning heavily on geopolitical risk premiums, which are feeding into demand for the Dollar, particularly as commodity prices rise and regional tensions persist. The revival attempt around the 1.1500 mark highlights ongoing uncertainty more than any structural strength.
Lagarde’s inability to shift sentiment with slowing inflation data underscores how monetary policy levers alone are proving insufficient. The latest figures point to stalling price increases, nudging annual inflation below the ECB’s target. That’s not prompting aggressive repricing, but it certainly anchors expectations on the softer side for now. Despite these disinflationary signals, investors are not rushing back into the Euro, revealing how much political risk and global hardship dominate flow sentiment.
Meanwhile, Powell’s stance—seen through future positioning—suggests markets suspect some accommodation could return before year-end, possibly around September. We’re seeing modest repositioning for lower yields, but that narrative has yet to override Dollar demand due to its safe-haven role.
Oil surging by over $3 and nearing $75 per barrel introduces more than just energy cost worries. It presses on growth expectations, especially within countries heavily reliant on imports—like those in the Euro area. These pressures, in turn, affect rate outlooks indirectly by reducing room for policy tightening.
Technicals show that prices broke through a triangle formation only to stall. What followed was not conviction buying, but more of a reactive bounce. Price hovering around 1.1500 suggests indecision rather than any directional agreement. Should Powell and the FOMC deliver a dovish shift—or even hint at timing around possible cuts—it may cap some of the Dollar’s momentum. Yet that would need to be weighed against the broader backdrop of ongoing conflict and the corresponding demand for safe assets.
From a positioning standpoint, risk premia remain elevated. We can see it in how traders are rotating away from more volatile crosses and into defensive pairs. Demand pushing the Euro to outperform briefly against the Franc reflects short-term adjustment more than conviction.
For now, keep a close focus on both scheduled speeches and any unplanned interventions, particularly those related to military movements or US diplomacy in the region. Options pricing implies heightened short-term volatility, especially around FOMC meetings and high-impact data. That leaves little room for complacency.
Delta hedging ratios may shift quickly, especially in thin liquidity conditions, amplifying price movements, which heightens the need for active risk control. Entries and exits should lean on technical confirmation and momentum metrics rather than directional bias alone. In this fast-moving macro environment, having a firm handle on implied volatility skew and knowing which payloads options traders are leaning towards offers substantial edge.
From our side, we are remaining highly responsive to US Dollar correlation flows, while closely tracking yield spreads across the Atlantic. These provide cleaner signals than isolated inflation prints in the current environment. Also, be aware of seasonal supply impact on commodities which could spill over into currency markets through inflation expectations.
The nearer we get to the next FOMC minutes and any policy-related commentary, the more positioning will matter. It’s here where intraday reversals and broader narrative shifts could produce entry opportunities or hedge timing advantages.
