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Short-Term Rally May Offer Selling Opportunities at Higher Levels
Summary:
The implementation of the U.S.-Iran agreement could reduce the likelihood of further Fed rate hikes, prompting policymakers to adopt a wait-and-see approach or even soften their hawkish guidance, which would weigh on the U.S. dollar. However, market uncertainty surrounding the incoming Fed Chair may limit the euro's upside in the short term.
Sell
TradingEURUSD
EXP
1.16183
Entry Price
1.14927
TP
1.16535
SL
1.16078 +0.00190 +0.16%
0
Point
Flat
1.14927
TP
CLOSING
1.16183
Entry Price
1.16535
SL
Fundamentals
EUR/USD rebounded after dipping slightly at the open and is currently trading around the 1.1604 level. The move is largely driven by the implementation of the U.S.-Iran agreement, which has led markets to believe that the worst phase of U.S. inflation may have already passed.
U.S. inflation accelerated to its highest level in more than three years in May, with energy prices being the main driver. However, oil prices have retreated following the agreement, and the overall downward trend in energy prices has become increasingly evident. Markets have begun to expect inflation to gradually return to levels seen before the conflict.
A stabilization in inflation implies that the Federal Reserve may abandon the possibility of further rate hikes, opting instead to remain on hold or even tone down its hawkish guidance. Such a shift would be negative for the U.S. dollar.
However, the market still has very limited visibility regarding the policy stance of incoming Fed Chair Kevin Warsh. Investors are unable to accurately assess how he would react to key economic developments such as accelerating employment growth and rising inflation, nor can they clearly gauge his approach to interest-rate management.
As a result, market participants are likely to adopt a cautious stance on policy expectations. This suggests that the downside potential for the U.S. dollar may remain limited ahead of the upcoming Fed interest-rate decision. Consequently, EUR/USD could experience a volatile pattern characterized by an initial rise followed by a pullback.
Technical Analysis
From a timeline perspective, EUR/USD's price action can be divided into three phases.
The first phase spans from June 2025 to the present, during which the pair has traded in a broad range between 1.1856 and 1.1418.
The second phase began around mid-April and continues today, with EUR/USD moving within a descending channel.
The third phase started in mid-May, during which the pair has fluctuated within a narrower range between 1.1586 and 1.1661.
After previously breaking below the consolidation range, EUR/USD hovered near the lower boundary of the descending channel before rebounding. The pair has now returned to the previous range, although whether it can firmly establish itself above this area remains to be seen.
From the Ichimoku perspective, both the Base Line and Conversion Line are moving sideways, with the Conversion Line positioned above the Base Line. The current price remains above the Conversion Line, suggesting that EUR/USD may continue to edge higher in the near term before eventually turning lower.
In the ADX indicator, the ADX line is declining, indicating weakening bearish momentum. However, with the ADX still near the 19 level, the room for further declines in the indicator appears limited, implying that a rebound in momentum could emerge.
Meanwhile, the -DI line has crossed below the +DI line and stands near 13.7, while the +DI line is rising noticeably. This suggests that EUR/USD still has room for a modest short-term advance before resuming its decline.
Trading Recommendation
Direction: Short
Entry Price: 1.16183
Target Price: 1.14927
Stop Loss: 1.16535
Support Levels: 1.15866, 1.15223, 1.14827
Resistance Levels: 1.16183, 1.16618
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