EUR/USD Price Analysis and Forecast: EUR/USD Starts the New Week on a Positive Note

On Monday, the EUR/USD pair is showing resilience, strengthening after a modest bullish gap at the open and climbing above the psychological 1.1400 level. The intraday recovery is driven by the broad-based weakening of the US dollar, supported by renewed optimism over a diplomatic resolution to the prolonged conflict between the United States and Iran.

Overnight into Friday, the United States temporarily suspended its airstrikes after 13 consecutive nights of attacks on Iranian targets, prompting Tehran to pause its retaliatory actions against Washington's allies in the Middle East. According to US Ambassador to the United Nations Mike Waltz, although military forces remain on high alert, President Donald Trump intends to provide a temporary window for negotiations. This, in turn, has improved investor sentiment and undermined the US dollar. At the same time, the easing of hostilities has triggered a sharp decline in oil prices, reducing inflationary pressures and lowering expectations of further Federal Reserve interest rate hikes. This has become another factor weighing on the US Dollar Index (DXY), which measures the dollar's performance against a basket of major currencies. Nevertheless, traders may remain cautious about opening new EUR/USD positions ahead of key central bank events.On Wednesday, following its two-day policy meeting, the Federal Reserve will announce its monetary policy decision. Market participants are expected to focus on any new signals regarding the future policy path, as these will play a crucial role in shaping the US dollar's short-term direction. In addition, close attention will be paid to further developments in the Middle East crisis, which could revive safe-haven demand for the dollar and create significant trading opportunities for the EUR/USD pair.

According to a report by TD Securities, the FOMC is expected to leave monetary policy unchanged. In its research note, the bank stated: "We believe the FOMC will leave interest rates unchanged." However, the analysts acknowledged that "higher oil prices resulting from the Middle East conflict increase inflation risks and strengthen the case for a rate hike," while adding that "additional evidence is required to secure majority support." In their view, the Committee is gradually leaning towards a more hawkish stance. However, they expect Chair Warsh to refrain from providing clear forward guidance and anticipate two dissenting votes from Hammack and Logan.

From a technical perspective, the pair remains under pressure despite today's positive performance. Bulls must first break above the 20-day Simple Moving Average (SMA) to improve the prospects for further gains. Immediate support is located in the 1.1370–1.13547 level. A break below this area would expose the June low. Technical oscillators remain in negative territory, indicating that bears continue to hold the advantage.

The table below shows the percentage change in the US dollar against the major currencies today. The US dollar posted its strongest gain against the Canadian dollar.