The EUR/USD currency pair retreated into negative territory, trading near the 1.1500 level during early European hours on Friday, as escalating geopolitical tensions in the Middle East dampened appetite for riskier assets and reinforced demand for the US Dollar as a safe haven. The Euro came under pressure following a sharp deterioration in the US-Iran standoff. Iranian Parliament Speaker Mohammad Bagher Ghalibaf warned on Thursday that the United States would pay the price for the killing of Iranian civilians, according to The Guardian.
The Islamic Revolutionary Guard Corps (IRGC) subsequently announced it had targeted US military bases in Kuwait, Jordan, and Bahrain in retaliation for US strikes on a building on Iran's Qeshm Island. Iranian military officials further stated that the Strait of Hormuz would remain closed and that what they described as the aggressor would face consequences — a development with significant implications for global energy supply chains. Despite the bearish near-term pressure on the shared currency, stronger-than-expected economic data from the Eurozone and Germany provided some degree of support.
The better-than-anticipated GDP figures have reinforced market expectations that the European Central Bank could deliver a second interest rate hike this year, potentially as early as September. Elias Haddad of Brown Brothers Harriman underscored the significance of the recent data improvement, stating that the recovery in Eurozone economic activity and above-target inflation reinforces the case for the ECB to resume raising rates in September. He noted that the combination of firmer growth and persistent price pressures keeps the central bank on track for another policy move following its current pause.
From a technical standpoint, the EUR/USD pair maintains a constrained outlook. According to analysis published by FXStreet, the pair remains capped below the 100-day Simple Moving Average (SMA) at 1.1570, which continues to act as a significant resistance level that bulls would need to reclaim to ease the broader bearish pressure. The pair is also pressing against the upper Bollinger Band, located around 1.1510, suggesting that upside attempts are encountering supply.
The Relative Strength Index (RSI) is registering approximately 59, indicating improving but not yet overbought momentum within an overall constrained technical backdrop. The Bollinger midline continues to underpin the structure. On the downside, initial support is identified at the daily mid-Bollinger Band near 1.1425, with the lower Bollinger Band around 1.1340 representing the next significant floor.
A break below that level would likely reinforce downside momentum and open the path toward lower lows, according to FXStreet's technical analysis. Market participants are expected to remain focused on geopolitical developments in the Middle East alongside any further ECB commentary for near-term directional cues on the pair.
Source: fxstreet.com