EUR/USD Holds Near 1.1450 Amid Safe-Haven Demand

Key Moments

Geopolitics and Central Banks Anchor Market Sentiment

The EUR/USD pair clawed back some recent losses during Monday’s Asian session, edging back toward the 1.1450 area. However, further gains appeared vulnerable as heightened tensions in the Middle East supported demand for safe-haven currencies such as the US Dollar (USD) at the expense of the Euro (EUR).

US President Donald Trump said over the weekend that “many countries” would send warships to the region, following public calls for several nations to do so. He also warned that the North Atlantic Treaty Organization (NATO) faces a “very bad” future if US allies do not help ensure access to the Strait of Hormuz.

Investors were also focused on upcoming monetary policy decisions by the US Federal Reserve (Fed) and the European Central Bank (ECB). The Fed was widely anticipated to leave its benchmark rate in the 3.50%-3.75% range on Wednesday, while ongoing energy-driven price pressures were undermining expectations for rate cuts further ahead.

Market-based pricing in swaps showed that participants expected the ECB to move more aggressively than previously thought. According to LSEG data, investors now saw a potential rate hike as early as June.

Bearish Technical Structure Dominates EUR/USD

On the daily chart, the near-term technical outlook for EUR/USD remained negative. The spot price continued to trade comfortably below the 100-day exponential moving average, which had begun to flatten following an earlier topping formation. At the same time, the pair had recently closed under the lower Bollinger Band and was now sliding along the lower edge of the volatility envelope.

The Relative Strength Index (RSI) was holding in oversold territory after dropping from mid-range values, reinforcing the view that downside momentum stayed strong and that sellers retained control. This was the case even though EUR/USD was stretched below its 20-day Bollinger Band midpoint, located near 1.1700.

Key Levels to Watch

Price action remained defined by nearby resistance and support markers that are guiding short-term trading strategies.

As long as EUR/USD remains capped beneath the 1.1620 area, any rebound is expected to encounter selling pressure, keeping attention on successive lower supports at 1.1415 and 1.1360.

(The technical analysis of this story was written with the help of an AI tool.)

Euro Basics and Market Drivers

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.

EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

The ECB and Its Influence on the Euro

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.

The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.

The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

Role of Inflation Data

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.

Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

Economic Indicators and the Euro

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency.

A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.

Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

Trade Balance and Currency Performance

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.

If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.