The EUR/USD currency pair attracted dip-buyers during the Asian session on Friday, climbing back toward its highest level since May 14, which was set the previous day. Bulls are now awaiting a move beyond the 1.1700 mark before placing fresh bets, with spot prices on track to register strong weekly gains and extend the month-to-date uptrend amid a broadly weaker US Dollar (USD) [1]. The USD Index (DXY) remains depressed near a three-month low as traders scale back bets for an immediate Federal Reserve (Fed) rate hike, citing signs of cooling inflation [1].
Expectations that energy-driven inflation could prompt the European Central Bank (ECB) to adopt a more hawkish stance are supporting the shared currency and the EUR/USD pair. Commerzbank notes that the increasingly tight balance in European gas storage increases the pressure to import more in the coming months, raising price risks. The bank cautions that insufficient gas inflows would further increase upward pressure on European electricity prices, as the region competes more aggressively for scarce LNG supplies [1].
The immediate market reaction to the US Treasury Department's plan to double the size of some long-dated debt buyback operations is fading, as inflation risks from higher energy prices persist. Hawkish FOMC Minutes released on Wednesday keep bets for at least one interest rate hike in 2026 on the table and support elevated US bond yields, which could bolster the USD [1].
Geopolitical tensions, particularly the US-Iran standoff over the Strait of Hormuz, are maintaining a risk premium for the safe-haven Greenback. President Donald Trump has threatened economic warfare against Iran and warned of economic consequences for any country providing lifelines to Iran, which may limit losses for the USD and cap the EUR/USD pair's gains [1].
Traders are now looking forward to the release of flash PMIs from the Eurozone and the US for fresh impetus. Incoming geopolitical headlines are expected to continue infusing volatility across global financial markets, driving demand for the safe-haven USD and creating short-term trading opportunities around the EUR/USD pair [1]. Technical analysis shows the EUR/USD pair holds a bullish near-term bias above the 200-day Simple Moving Average (SMA) and the 61.8% Fibonacci retracement of the April-June decline at 1.1644, suggesting dips are likely to attract buying [1].
CONCLUSION
The EUR/USD pair is trading near multi-month highs, supported by a weak US Dollar and expectations of a more hawkish ECB amid energy-driven inflation risks. However, geopolitical tensions and persistent inflation concerns may cap further gains. Traders are awaiting upcoming PMI releases and geopolitical developments for additional market direction.