Euro Below 1.16 as Traders Eye Iran, Fed Minutes

Key Moments

Fundamental Backdrop: Iran Deadline and Fed Outlook

The EUR/USD pair is trading slightly softer around 1.1530 during the Asian session on Tuesday, holding broadly steady within the confines of Monday’s price band. The currency pair is consolidating as market participants look ahead to Iran’s formal response to a ceasefire proposal from the United States, which carries a Tuesday 08:00 PM ET deadline.

At the same time, the US Dollar Index (DXY) – which measures the performance of the US currency against six major peers – is marginally higher, changing hands near 100.10 as of the latest trade.

In the run-up to US President Donald Trump’s deadline, geopolitical rhetoric has intensified. An advisor to Iran’s Parliament Speaker Mohammad Bagher Ghalibaf stated that Trump has about 20 hours to surrender to Iran or risk his allies being pushed back to the Paleolithic Age, stressing that Tehran will not make concessions. He described Trump’s threats as “delusional” and said they would not compensate for the “disgrace and humiliation” of the US in the region.

On the US policy front, attention is also centered on the Federal Open Market Committee (FOMC) minutes from the March meeting, scheduled for release on Wednesday. During that meeting, the Federal Reserve opted to keep its benchmark interest rate unchanged in a target range of 3.50%-3.75%.

EUR/USD Technical Overview

In early Tuesday trading, EUR/USD is edging lower toward 1.1530. The spot rate is trading just beneath the 20-day Exponential Moving Average (EMA) near 1.1560, a configuration that maintains a mildly bearish bias in the short term as the pair struggles to regain that moving average.

The 14-day Relative Strength Index (RSI) is hovering in the mid-40s, indicating negative but not excessive downside momentum and aligning with a market that is gently tilting lower within a broader consolidation. A descending resistance line drawn from the vicinity of 1.1660 continues to cap recovery attempts, and the recent pattern of lower closes beneath this line signals that sellers still hold the near-term edge.

On the topside, initial resistance is located at the 20-day EMA near 1.1560. A sustained move above this level would expose the downward-sloping trend-line resistance around 1.1600, followed by the March 10 peak at 1.1666. On the downside, an ascending support line drawn from the 1.1410 area is lending support around 1.1470. A daily close beneath 1.1470 would clear the way for a potential move toward 1.1410 as the next notable support.

While the pair trades below 1.1600, any rebounds are likely to encounter selling interest, keeping market focus on whether the 1.1470-1.1410 support band can absorb ongoing bearish pressure.

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

US Dollar: Background and Policy Drivers

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.