The Euro fell for a second consecutive day against the US Dollar on Wednesday, trading around 1.1740 as heightened tensions in the Middle East bolstered the safe-haven appeal of the greenback. The move comes as traders weigh the implications of an extended US-Iran ceasefire against the backdrop of a continued naval blockade and threats of military action.
"The Eurozone outlook remains highly uncertain amid an enormous energy supply shock linked to Middle East tensions and the Strait of Hormuz blockade," European Central Bank (ECB) President Christine Lagarde warned on Tuesday. While energy prices haven’t yet reached worst-case levels, Lagarde emphasized the outlook remains fragile.
The US Dollar Index (DXY), which tracks the greenback’s value against six major currencies, was marginally up near 98.30. The dollar's strength persists despite US President Donald Trump's announcement to extend the ceasefire with Iran indefinitely. However, the US Navy is maintaining its blockade of Iranian ports, and Iran’s military has warned of strikes on preselected targets, keeping risk sentiment subdued.
The situation in the Strait of Hormuz, a critical chokepoint for about 21% of global petroleum liquids consumption, remains the focal point for markets. Any disruption could lead to a spike in energy prices, complicating the ECB's mandate to maintain price stability. Investors are now looking toward preliminary PMI data from the Eurozone on Thursday and the ECB's next policy meeting on April 30 for further cues.
Adding support to the US Dollar, data released on Tuesday showed US Retail Sales increased 1.7% month-over-month in March, beating market expectations of 1.4% and up from a 0.7% rise in February. The strong reading points to a resilient US consumer, reinforcing the case for the Federal Reserve to maintain its current policy stance.
From a technical perspective, the EUR/USD pair faces immediate resistance at the 61.8% Fibonacci retracement level of its recent swing, near 1.1825. A break above this could open the door to the 78.6% retracement at 1.1938. On the downside, initial support is seen at the 20-period exponential moving average at 1.1694, followed by the 38.2% retracement at 1.1666.
The risk-off mood also impacted other currency pairs, with the EUR/CAD cross extending its losing streak for a sixth day to trade around 1.6040, pressured by firmer oil prices that have lifted the commodity-linked Canadian Dollar.
This article is for informational purposes only and does not constitute investment advice.
