EUR/USD moved back above 1.1638 in European trading on Monday, recovering from last week’s slide as the U.S. dollar lost momentum. The pair traded near 1.1638 after touching an intraday high of 1.16538, with a weaker dollar and a sharp drop in Brent crude helping lift the euro.
The rebound comes as markets reduce some of the dollar’s safe-haven premium amid signs of de-escalation in U.S.-Iran tensions. At the same time, hotter-than-expected April U.S. inflation data has kept expectations for Federal Reserve rate cuts restrained, limiting how far EUR/USD can run without fresh confirmation from upcoming economic releases.
That leaves the pair at an important inflection point. EUR/USD has recovered a key technical level, but resistance around 1.1675 to 1.1710 now stands in the way of a broader breakout.
Key Facts
- EUR/USD traded around 1.16382 on Monday, up roughly 0.31% on the session.
- The pair’s intraday range ran from 1.16287 to 1.16538 after rebounding from the 1.1575 area reached last week.
- The U.S. Dollar Index hovered near 99.03 as Brent crude fell about 5% on easing geopolitical risk.
- Markets priced a 98.1% probability that the Federal Reserve will keep rates at 3.50% to 3.75% at its next meeting.
- Immediate EUR/USD resistance is seen at 1.1675 to 1.1680, with support clustered around 1.1600 and 1.1574.
EUR/USD Forecast
The main driver behind the latest EUR/USD rebound is the shift in sentiment around the dollar rather than a major improvement in eurozone fundamentals. As geopolitical stress around Iran eased, the demand for the dollar as a defensive asset weakened. Lower oil prices also reduced some inflation concerns, which in turn softened U.S. yields and made the dollar less attractive against major currencies.
For the euro, lower energy prices matter in a more direct way. The eurozone remains heavily exposed to imported energy costs, so a sustained decline in crude can improve the region’s inflation and growth outlook. That dynamic gives the single currency an additional tailwind when oil falls sharply, especially against a dollar that had been benefiting from geopolitical uncertainty.
Still, the move is not one-sided. April U.S. CPI came in hotter than expected, reinforcing the view that the Federal Reserve may keep policy restrictive for longer. That stronger inflation backdrop supports U.S. real yields and limits downside for the dollar. In practical terms, EUR/USD may need softer U.S. data, especially from core PCE and growth releases, before traders are willing to push the pair decisively above the upper end of its current range.
EUR/USD has regained 1.1638, but the next leg higher depends less on Europe and more on whether U.S. inflation and yields begin to cool.
Why 1.1675 to 1.1710 Matters
From a technical perspective, the pair is approaching a dense resistance zone. The 1.1675 to 1.1680 area marks a key Fibonacci retracement level, while 1.1710 adds another layer of resistance through a longer-term moving average and a deeper retracement threshold. A clean break above that band would strengthen the bullish case and could open the way toward 1.1740, 1.1785, and potentially the prior cycle high near 1.1842.
On the downside, 1.1638 now acts as an immediate test of whether the rebound has substance. If EUR/USD drops back below that level, attention would quickly shift to 1.1600 and then 1.1574, the latter seen as a structural support point. A daily close below 1.1574 would suggest the broader bearish trend from the April-May decline is still intact.
Implications for Investors
For investors, the current EUR/USD setup highlights the growing importance of cross-asset signals. Oil, front-end Treasury yields, and expectations for Federal Reserve policy are all shaping the currency pair more than eurozone-specific developments. That means portfolios with exposure to European equities, U.S. multinationals, or unhedged foreign assets may see currency moves increasingly tied to inflation and geopolitical headlines rather than domestic eurozone data alone.
A firmer euro can ease imported inflation pressures in Europe and support sectors sensitive to energy costs, including industrials and some consumer businesses. However, it can also weigh on exporters if the appreciation becomes more pronounced. For U.S.-based investors, sustained dollar weakness may improve returns on overseas assets in local markets, but it can also reduce the currency translation benefit for companies reporting in dollars.
The biggest watch-points for the week are Thursday’s U.S. Q1 GDP second estimate and the April core PCE deflator, both scheduled for 12:30 PM GMT, as well as preliminary German inflation on Friday. A softer U.S. inflation print could reinforce the move above 1.1638 and push EUR/USD toward the 1.1710 zone. A hotter reading, or renewed geopolitical stress that lifts oil back toward triple digits, would likely revive dollar demand and pressure the pair back toward support.
For now, EUR/USD is recovering, but conviction remains limited until the market gets fresh confirmation from U.S. inflation and rate expectations. The next decisive move is likely to come from macro data rather than chart patterns alone.
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