EUR/USD struggles below 1.1770 with the US-Iran peace talks in question
- EUR/USD trims losses and reaches the 1.1760 area after bouncing up from session lows around 1.1730.
- German Producer prices accelerated at the fastest pace in nearly four years in March.
- The Euro remains capped below a previous support area around 1.1770.
The Euro (EUR) has retraced previous losses against the US Dollar (USD) following a weak weekly opening, as rising tensions between the US and Iran have curbed hopes of a swift resolution of the conflict. The pair has returned to the 1.1760 area after hitting daily lows below 1.1730, but upside attempts remain capped below the lows seen at the end of last week, in the 1.1770 area.
Risk appetite remains subdued, as investors await developments from the Middle East after the seizure of an Iranian vessel by US authorities undermined an already frail ceasefire. On Monday, a spokesperson from the Iranian foreign ministry suggested that Tehran might not attend the second round of the peace talks scheduled to start next Tuesday.
In Europe, the German Producer Price Index (PPI) data has shown a 2.5% monthly increase in March, its strongest reading since August 2022, confirming the upside risks for inflation stemming from Iran's war. These figures follow strong wholesale prices and higher consumer inflation numbers in several other EU countries released last week, and add pressure on the European Central Bank (ECB) to hike interest rates in the coming months.
Technical Analysis: Resistance at former support near 1.1770
EUR/USD trades right above 1.1750, with a previous support area around 1.1770 capping bulls for now. Technical indicators in the 4-hour chart are in bearish territory. The Relative Strength Index (RSI) has eased to around 50, suggesting waning bullish momentum after the recent pullback, while the negative readings in the Moving Average Convergence Divergence (MACD) histogram hint that directional pressure remains modestly skewed to the downside.
Downside attempts remain contained above the previous tops, between 1.1720 and 1.1740, so far closing the path towards the key support area between the April 13 low, at 1.1680, and the support trendline from late March lows, now at 1.1660.
On the topside, initial resistance emerges at the aforementioned 1.1770 area (April 15, 16 lows). A break of that level exposes the April 16 highs at 1.1825 and then 1.1850.
(The technical analysis of this story was written with the help of an AI tool.)
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.