EUR/USD Stays Rangebound as Strong Dollar Caps Gains

Key Moments

Consolidation Ahead of Key Political Developments

The EUR/USD pair has been stabilizing during the Asian session on Wednesday, trading in a tight range just below the mid-1.1700s after suffering substantial declines the previous day. Market participants have been reluctant to initiate fresh positions and have instead adopted a cautious stance before a meeting between US President Donald Trump and Chinese President Xi Jinping.

Macro Drivers: Fed Expectations and Geopolitical Risk

US Dollar strength has been underpinned by several concurrent factors. On Tuesday, US consumer inflation data came in hotter than anticipated, prompting markets to increase expectations for a US Federal Reserve interest rate hike in 2026. This shift in rate expectations has lent support to the greenback and curtailed attempts by EUR/USD to rebound.

At the same time, perceptions that a US-Iran peace agreement has become less likely – amid ongoing differences regarding Tehran’s nuclear activities and the situation in the Strait of Hormuz – have also been supportive for the USD. These geopolitical tensions have reinforced safe-haven demand for the Dollar, acting as a drag on the euro’s performance against it.

Technical Picture: Trend Still Constructive, Momentum Fading

From a chart perspective, the advance seen in EUR/USD over roughly the last two weeks has unfolded within an upward-sloping channel. Spot remains above the 200-period Simple Moving Average on the 4-hour timeframe, which continues to provide a mildly positive near-term backdrop even as the latest pullback has cooled the pace of gains.

Momentum indicators, however, suggest that the bullish impulse has been losing steam. The Relative Strength Index has retreated toward the mid-40s, while the Moving Average Convergence Divergence line has slipped slightly below the zero line, with the histogram turning negative. These developments point to waning upside momentum despite the pair still trading within its existing rising channel.

Key Levels: Support and Resistance to Watch

Given the mixed technical signals, caution remains warranted for traders anticipating further declines. A clearer bearish signal would require a decisive move below the lower boundary of the ascending channel, which is located near 1.1715, followed by a sustained break under the 200-period Simple Moving Average at 1.1692. A confirmed drop beneath this latter level would undermine the current constructive setup and open the door to deeper pullbacks within the broader trading range.

On the upside, initial resistance is aligned with the top of the parallel channel, around 1.1830. A strong and convincing break above this zone would indicate a renewed bullish phase and could allow EUR/USD to extend higher in a more pronounced fashion.

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

US Dollar Performance Against Major Currencies This Week

The following table shows how the US Dollar has performed against major currencies so far this week. The US Dollar has been strongest versus the Japanese Yen.