EUR/USD Holds Near 1.1620 as Middle East Crisis, ECB Rate Bets and Strong Dollar Weigh

According to data published the previous day, the EU Consumer Price Index corrected from 1.3% to 1.0% month-on-month and rose from 2.6% to 3.0% year-on-year, while the core indicator changed from 0.8% to 0.9% and from 2.3% to 2.2%, respectively. Since the beginning of the Middle East conflict, price dynamics have been strengthening rapidly, and according to the ECB Watch Tool, 89.0% of traders now expect the interest rate to be raised to 2.25% at the June 11 meeting, while the probability of an adjustment to 2.25% and 2.50% at the July meeting is estimated at 46.1% and 48.9%, respectively.

Meanwhile, the European Parliament and the Council of the EU have reached a preliminary agreement to eliminate customs duties on industrial goods from the United States and expand access to the EU market for American seafood and agricultural products. This is a key step bringing the EU closer to fulfilling the commitments reached under the agreement signed in July 2025. According to analysts, this may help avoid further tariff increases from the White House. Earlier, representatives of the Republican administration had pledged to maintain 15.0% tariffs on European goods across all sectors, except for steel and aluminium supplies, where a 50.0% rate applies. European counterparts, in turn, agreed to remove duties on all American industrial goods and open the market to a wide range of products, including food items such as seafood, dairy products, pork and soybean oil. However, the document still required final approval, and the delay had already caused growing irritation from US President Donald Trump.

As for the key factor determining the direction of EUR/USD — the US dollar — its dynamics remain unstable, with the USDX currently holding near 99.1 points. On Tuesday, the Senate voted to consider a resolution in full session that would require US President Donald Trump either to end all military action against Iran or obtain official authorization from Congress to use force. The document was supported by 50 senators, while 47 voted against it. The initiative was first discussed in March, immediately after the active phase of the US-Iran confrontation began, but it was blocked three times by Republican representatives in the US House of Representatives. Investors believe this step may help reduce tensions in the region and ease price pressure. April producer inflation data showed an acceleration from 0.7% to 1.4% month-on-month, compared with a forecast of 0.5%, and from 4.3% to 6.0% year-on-year, against expectations of 4.9%. The core indicator rose from 0.2% to 1.0% month-on-month and from 4.0% to 5.2% year-on-year, compared with forecasts of 0.3% and 4.3%. Against this background, the new Federal Reserve Chair Kevin Warsh, who is set to be inaugurated tomorrow, will likely need to find a compromise in order to avoid a sharp economic slowdown while preventing consumer prices from continuing to rise. This could make monetary tightening possible, despite contradicting the position he expressed before his appointment.

Additional support for the US dollar comes from the bond market, where yields have remained historically high for an extended period: today, 1-year bonds are trading at 4.180%, 10-year bonds at 4.992%, while 20-year and 30-year bonds are yielding 5.605% and 5.666%, respectively.

Support and resistance levels

On the daily chart, the instrument is attempting to move away from the support line of the ascending channel with boundaries at 1.1900–1.1650.

Technical indicators have fully reversed and are holding a new sell signal formed this week: the fast EMAs on the Alligator indicator are located below the signal line and continue to widen the fluctuation range, while the AO histogram is forming corrective bars and moving lower in the negative zone.

Support levels: 1.1560, 1.1450.

Resistance levels: 1.1660, 1.1820.

Trading scenarios and EUR/USD forecast

Short positions may be opened after the price consolidates below 1.1560, with a target at 1.1450. Stop-loss — 1.1630. Expected timeframe: 7 days or more.

Long positions may be opened after the price consolidates above 1.1660, with a target at 1.1820. Stop-loss — 1.1580.