EUR/USD Outlook: Will 1.1500 Hold as Dollar Strength Continues?

The euro has weakened as investors move back into the US dollar for safety, reversing the earlier “Sell America” trade. At the same time, Eurozone inflation surprised to the upside, increasing expectations that the ECB will raise interest rates, with markets now pricing in about two rate hikes by the end of the year.

However, rising energy prices linked to the Iran conflict are creating risks for the Eurozone economy. If the conflict continues and disrupts oil shipments through the Strait of Hormuz, the region could face stagflation, meaning slower growth and higher inflation.

For now, markets appear to be pricing in a short conflict lasting weeks, but if tensions escalate or oil supply disruptions last longer, EUR/USD could face further downside pressure.

The 1.15000 level is acting as key support. A break below this area could open the door for further downside and extend the current downtrend. However, the RSI is currently in oversold territory, suggesting the pair may see a short-term pullback before the next move. On the upside, 1.16700 is the first resistance level, followed by 1.17000 and 1.17500.

EUR/USD Daily Chart