The Euro (EUR) continued to weaken against the US Dollar (USD) on Tuesday, with the EUR/USD pair testing fresh one-month lows below 1.1360 and approaching the year-to-date low of 1.1324 [1]. Despite a truce in the Middle East and a 12% decline in Brent Oil prices, which contributed to a mild risk appetite and marginal gains in European stock markets, the Euro failed to gain significant support [1].
Market optimism regarding a potential negotiated end to the US-Iran conflict and lower oil prices did not translate into a weaker US Dollar. Instead, traders focused on the possibility of a surprise rate hike by the Federal Reserve later in the week. According to the CME Group’s FedWatch Tool, futures markets are now pricing a 35% chance of a 25 basis point hike on Thursday, up from 25% a week ago, which has underpinned support for the US Dollar and pushed it to fresh monthly highs against a basket of currencies [1].
From a technical perspective, EUR/USD trades at 1.1362, maintaining a mild bearish trend after being rejected at the 1.1420 area on Monday. The 4-hour Relative Strength Index (14) is moving lower from the neutral 50 line, and the MACD has entered negative territory, though it remains near zero, indicating flat to slightly bearish momentum [1]. Should the pair confirm a break below 1.1360, the next downside target is the 2026 trading floor at 1.1324, with further support seen between the 127.2% Fibonacci extension at 1.1245 and the late May 2025 low at 1.1210 [1]. On the upside, resistance levels are noted at Monday's high of 1.1420 and the top of the monthly range at 1.1480 [1].
CONCLUSION
EUR/USD remains under pressure as traders anticipate a possible Federal Reserve rate hike, with the pair nearing key support levels. The market's focus on US monetary policy continues to bolster the US Dollar, while technical indicators suggest a mildly bearish outlook for the Euro in the near term.