EUR/USD Falls as Energy Risks and Dollar Strength Weigh on the Euro

Overall, EUR/USD has fallen sharply, dropping from 1.2080 earlier this year to around 1.14600s, its lowest level since November, as investors move into the US dollar.

As discussed earlier, the main pressure on the euro comes from the ongoing conflict involving Iran, which has pushed energy prices higher after the Strait of Hormuz was closed, disrupting oil and gas exports from the Middle East. Europe is particularly vulnerable because it relies heavily on energy imports from the region after reducing dependence on Russia. Higher energy costs could hurt European industry, increase inflation, and reverse some of the progress made by the European Central Bank.

Looking ahead, markets will closely watch the ECB interest rate decision next week, where economists expect rates to remain unchanged, although markets still see the possibility of a rate hike later this year if inflation rises further. The Federal Reserve’s rate decision will also be important, as the US faces mixed economic signals with a weaker labour market but inflation that could rise again if energy prices keep increasing. This leaves the Fed in a difficult position between controlling inflation and supporting growth.

From a technical perspective, EUR/USD remains in a clear downtrend, having broken below key trend support and trading under the important 1.15 level, which previously acted as resistance. On the daily chart, price action is also starting to resemble a three black crows pattern, a strong bearish formation that often signals sustained bearish momentum. A daily close below 1.14541 would confirm this pattern and strengthen the bearish outlook. If selling pressure continues, the pair could move lower toward the 1.1390 area, which was a key low from last year.

EUR/USD Daily Chart

On the upside, weaker-than-expected PCE data could support a short-term bounce in AUD/USD. The daily RSI is also in oversold territory, suggesting the pair may see a temporary recovery. However, the broader trend remains bearish, with ongoing geopolitical tensions continuing to weigh on the Australian dollar.