EUR/USD is holding near 1.1620 on Friday, with the US dollar on track to gain approximately 1% by the end of the week. The dollar is benefiting from safe-haven demand amid the escalating conflict in the Middle East and rising crude oil prices.
The joint US-Israel military operation against Iran continues into its seventh day. Tehran has responded with a fresh wave of missile and drone strikes targeting Gulf countries.
US President Donald Trump also stated that he would like to be involved in selecting Iran’s next leader. At the same time, he described the appointment of Mojtaba Khamenei – son of the late Supreme Leader – as unlikely.
Rising oil prices have heightened concerns over a new wave of global inflation, reinforcing expectations that the Federal Reserve may delay interest rate cuts. Markets now anticipate the first Fed rate cut no earlier than September or October, revised down from the previous July forecast.
This week, the dollar strengthened most notably against the euro, reflecting the European economy’s heavy reliance on oil imports from the Middle East.
Technical Analysis
On the H4 chart, EUR/USD is forming a compact consolidation range around the 1.1600 level. The current structure suggests a high probability of a wave developing towards 1.1533, with scope to extend further to 1.1500.
A downside breakout from this range would open the door for the second half of the momentum to unfold, with targets at least around 1.1400. Technically, this scenario is confirmed by the MACD indicator, whose signal line is below zero and pointing strictly downwards, reflecting sustained bearish momentum.
On the H1 chart, the market has completed a growth wave targeting 1.1620, followed by a decline to form a consolidation range around 1.1600. An upside breakout from this range could trigger another growth leg to 1.1660, potentially extending to 1.1675, after which the broader downward trend is likely to resume towards 1.1500.
A downside breakout from the range would activate a continuation wave towards 1.1500, which could mark the completion of the third wave in the broader downward trend. This scenario is confirmed by the Stochastic oscillator, whose signal line has turned away from 80, indicating a short-term downward swing towards the 20 level.
Conclusion
EUR/USD remains under significant pressure as geopolitical tensions in the Middle East drive safe-haven flows into the US dollar, while pushing oil prices higher and stoking inflation concerns. The combination of delayed Fed rate cut expectations and Europe’s particular vulnerability to energy disruptions has exacerbated the euro’s weakness. With technical indicators pointing firmly lower, further downside appears likely, though short-term consolidation around key levels may precede the next leg of the downtrend.
