EUR/USD Forecast: Bearish Momentum Tests 1.1420 Support

Investors and forex traders remain focused on the increased likelihood of a settlement in the US-Iran confrontation, which could culminate in the signing of a final agreement. On Sunday and Monday, the first round of face-to-face consultations between representatives of the parties took place in Bürgenstock, Switzerland, mediated by Pakistan and Qatar. In a joint statement, the mediators noted that Washington and Tehran had agreed on a plan to reach a final agreement within 60 days. A group involving the United States, Iran, and Lebanon will also be established to prevent military clashes between the Israel Defense Forces (IDF) and the Hezbollah paramilitary organisation in Lebanon. The Islamic Republic confirmed progress in finding a compromise and stated that negotiations would continue until the end of the week. However, US President Donald Trump said that attacks would resume if Iran failed to restrain its Hezbollah allies. In response, the opposing side announced another closure of the Strait of Hormuz, which supported oil prices.

At 10:00 (GMT+2), the EU will release June business activity data from S&P Global and Hamburg Commercial Bank (HCOB). The manufacturing index is expected to decline from 51.6 points to 51.2 points amid rising costs caused by higher hydrocarbon prices. At the same time, the services indicator may rise from 47.7 points to 48.1 points, remaining in contraction territory. Meanwhile, investors are assessing the impact of the European Central Bank’s decision to raise the key interest rate to 2.4% for the first time since September 2023. On Monday, ECB President Christine Lagarde said that policymakers retained flexibility to respond to the consequences of geopolitical tensions in the Middle East. She added that the future path of indicators remains uncertain, with upside risks to inflation and downside risks to economic growth. On Friday, Pierre Wunsch, Governor of the National Bank of Belgium, said that another tightening of monetary policy could be likely as soon as next month if further evidence emerges that consumer price growth is spreading beyond the energy sector. ECB Chief Economist Philip Lane stated that inflation is expected to remain above 3.0% until the end of the year. He stressed concerns that the crisis could intensify, describing it as a “moderate inflation shock,” and noted that the situation should not be compared with the extreme conditions of 2022, although its consequences are sufficient to justify restrictive rhetoric.

Meanwhile, US Federal Reserve officials unanimously kept the interest rate in the 3.50%–3.75% range while revising their forecasts. The rate is now expected to reach 3.8% by the end of the year, compared with the March forecast of 3.4%. Bank of America Corp. analysts have revised their estimates to three rate hikes totalling 75 basis points, followed by an extended pause. This postpones a shift toward a dovish policy stance for an indefinite period. Regarding inflation, the regulator stated that the problem had worsened and that the core Consumer Price Index could reach 3.5% in May, almost 70 basis points above last year’s level.

Support and resistance levels

On the daily chart, the Bollinger Bands are steadily declining. The price range is widening to the downside and is failing to keep pace with bearish activity. The MACD indicator is expanding in the negative zone, allowing the pair to continue its downward movement, while the Stochastic is located near its lows, suggesting that the asset may be oversold in the ultra-short term.

Resistance levels: 1.1450, 1.1500, 1.1529, 1.1577.

Support levels: 1.1400, 1.1367, 1.1300, 1.1255.

Trading scenarios and EUR/USD forecast

Short positions may be opened after a confident downside breakout of 1.1400, with a target at 1.1300. Stop-loss: 1.1450. Expected implementation period: 2–3 days.

Long positions may be opened after a breakout above 1.1450, with a target at 1.1529. Stop-loss: 1.1410.