Euro Holds Near Multi-Month Highs as Fed, Iran Weigh Dollar

Key Moments

EUR/USD has paused in a bullish consolidation after touching its highest level since late May, with bulls eyeing a sustained break above 1.1700.
US Dollar stabilization, driven by hawkish FOMC Minutes and safe-haven demand linked to Iran risks, has capped further EUR/USD gains.
Expectations of a September ECB rate hike and ongoing tightening prospects continue to underpin the Euro and support the positive EUR/USD outlook.

EUR/USD Consolidates After Testing Late-May Highs

The EUR/USD pair has entered a period of bullish consolidation after reaching its strongest level since late May during the Asian session on Thursday. Market participants are now focused on whether the pair can decisively clear the 1.1700 threshold before committing to new long positions and looking for an extension of an uptrend that has been in place for more than three weeks.

Following a sharp slide in the previous session, the US Dollar has stabilized and become a key counterforce to additional gains in EUR/USD. The earlier decline in the Greenback was closely tied to a drop in US bond yields to a three-month low. That move in yields followed an announcement from the US Treasury Department that it would at least double its purchases of longer-dated government securities from September, aiming to contain borrowing costs.

Fed Signals Hawkish Bias While Geopolitics Support the Dollar

The release of the Minutes from the July 28-29 FOMC meeting indicated that Federal Reserve officials saw a need to lift interest rates in the near term unless there is further progress on inflation. These Minutes, when combined with ongoing inflation concerns linked to higher oil prices, reinforced market expectations that the Fed will raise borrowing costs at least once in 2026. This hawkish backdrop has provided support to the US Dollar.

At the same time, geopolitical tensions have underpinned safe-haven demand for the currency. In the latest developments, President Donald Trump said the US will launch the most crushing economic operation against Iran and threatened severe financial penalties on any nation that helps Tehran evade sanctions or does business with Iran. Moreover, the US and Iran remain deadlocked over the Strait of Hormuz. This ongoing standoff has kept the war-risk premium elevated, offering support to crude oil prices and the Greenback.

ECB Tightening Expectations Limit EUR/USD Downside

Despite the support for the US Dollar, downside pressure on EUR/USD has remained contained. Market expectations that the European Central Bank will continue its tightening cycle at the upcoming September policy meeting have provided a floor for the common currency. These policy assumptions continue to act as a tailwind for the Euro and align with a constructive medium-term view on EUR/USD.

Against this backdrop, traders are now turning their attention to upcoming US economic data later in the North American session, looking for fresh catalysts that could influence the pair’s next directional move.

Technical Picture: Key Levels for EUR/USD

The recent breakout above the 200-day Simple Moving Average and the 61.8% Fibonacci retracement of the April-June decline has been regarded as a significant bullish signal for EUR/USD. These technical developments support the case for an advance toward the 78.6% Fibonacci retracement level at 1.1733, followed by the recent cycle peak at 1.1845.

On the downside, initial support is located at the 61.8% retracement at 1.1646, reinforced by the 200-day Simple Moving Average at 1.1630. If a deeper corrective pullback emerges, further structural support is seen at the 50.0% retracement at 1.1584 and the 38.2% retracement at 1.1523.

Euro Performance Against Major Currencies This Month

The table below shows how the Euro has performed against key major currencies this month in percentage terms. Over this period, the Euro has shown its strongest performance against the US Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-1.28%	-1.06%	-0.60%	-1.53%	-1.26%	-1.26%	-0.63%
EUR	1.28%		0.21%	0.65%	-0.23%	0.02%	0.02%	0.65%
GBP	1.06%	-0.21%		0.47%	-0.45%	-0.21%	-0.19%	0.46%
JPY	0.60%	-0.65%	-0.47%		-0.88%	-0.79%	-0.84%	-0.07%
CAD	1.53%	0.23%	0.45%	0.88%		0.23%	-0.19%	1.00%
AUD	1.26%	-0.02%	0.21%	0.79%	-0.23%		0.03%	0.66%
NZD	1.26%	-0.02%	0.19%	0.84%	0.19%	-0.03%		0.65%
CHF	0.63%	-0.65%	-0.46%	0.07%	-1.00%	-0.66%	-0.65%

The heat map can be read by selecting a base currency from the left column and a quote currency from the top row. The figure at the intersection represents the percentage change of the base currency against the quote currency. For instance, choosing the Euro in the left column and moving across to the US Dollar displays the percentage change for EUR (base)/USD (quote).