Euro Rebounds vs Dollar Ahead of Fed, ECB Decisions

Key Moments

EUR/USD Regains Ground as Dollar Rally Fades

The EUR/USD pair recovered from early losses and moved into positive territory around 1.1730 during Monday’s Asian trading hours. The advance in the pair coincided with a reversal in the US Dollar (USD), which gave back its initial gains.

At the time of writing, the US Dollar Index (DXY) – a measure of the Greenback against a basket of six major currencies – was down 0.06% and trading close to 98.45. The index had started the session significantly higher near 99.35 after the United States canceled a visit to Islamabad for another round of peace talks with Iran, even as Iran’s foreign minister Seyed Abbas Araghchi traveled to Pakistan in an effort to restart discussions.

Geopolitical Developments Around Iran and the Strait of Hormuz

Iran has put forward a new proposal to the United States regarding the reopening of the Strait of Hormuz and ending the ongoing war, according to Axios, as reported by Bloomberg. The proposal reportedly includes delaying nuclear negotiations, with those talks to take place only after any US blockade of the Strait of Hormuz is lifted. This approach signals Iran’s willingness to move toward ending nearly two months of conflict in the Middle East.

Central Bank Meetings Set to Drive Volatility

Investors are bracing for potentially sharp moves in EUR/USD this week, with both the Federal Reserve (Fed) and the European Central Bank (ECB) scheduled to announce their latest monetary policy decisions. The Fed is due on Wednesday, followed by the ECB on Thursday, keeping market participants focused on any shifts in interest rate guidance or policy language that could affect the relative outlook for the US Dollar and the Euro.

EUR/USD Technical Outlook

EUR/USD was trading slightly higher around 1.1730 at the time of writing. The pair maintains a constructive short-term technical tone as it continues to hold above the 20-day exponential moving average (EMA) at 1.1696, indicating that buyers remain in control after reclaiming this dynamic support level.

The Relative Strength Index (RSI) stands at 54.9, modestly above the neutral 50 threshold, suggesting steady but not excessive bullish momentum as price action extends further into the upper portion of the recent Fibonacci retracement range.

On the upside, the first technical barrier is located at the 50.0% Fibonacci retracement level at 1.1749. A clear break above this area would open the door toward the 61.8% retracement at 1.1828, with further resistance seen at 1.1941 and then in the cycle high zone around 1.2085.

On the downside, initial support comes in at the 20-day EMA at 1.1696. Below there, the 38.2% Fibonacci retracement level at 1.1670 provides an additional cushion. A more pronounced decline would bring the 23.6% retracement at 1.1572 into focus, ahead of a more substantial support region near the structural base around 1.1413.