EUR/USD Fundamental Analysis: EUR/USD Remains Under Pressure As The Dollar Strengthens Its Dominance Amid Global Geopolitical Tensions

Market attention remains focused on the conflict between the United States and Iran, where the lack of concrete diplomatic progress has heightened volatility across multiple asset classes. Traders reacted to a series of contradictory headlines regarding possible negotiations, temporary ceasefires, and new military movements in the region. These factors have prevented stability from returning to global market sentiment.

One of the main concerns remains the Strait of Hormuz, a strategic corridor through which a significant portion of global energy trade passes. The continued partial closure of this maritime route is keeping pressure on the oil market and fueling fears of prolonged disruptions in the global supply chain, which could translate into renewed inflationary pressures for major developed economies.

In the energy market, West Texas Intermediate crude stabilized near $95 per barrel after several sessions marked by strong volatility. Although prices have pulled back from recent highs, the fact that they remain at elevated levels suggests investors are still pricing in a prolonged risk scenario and a geopolitical resolution that could take longer than initially expected.

This oil price behavior has had direct implications for the US dollar. Market participants believe that a higher-energy-price environment could keep US inflation above the Federal Reserve’s targets for longer, reducing the likelihood of future rate cuts and strengthening the narrative of a structurally strong dollar.

On the European side, the latest macroeconomic indicators have raised fresh doubts about the region’s capacity to recover. The Eurozone composite PMI fell to 48.6 points, remaining in contraction territory and reflecting a deterioration particularly evident in the services sector, which, until a few months ago, had shown greater resilience.

Germany, considered the bloc’s main economic engine, also showed additional signs of industrial slowdown, while France continues to face moderate domestic consumption and weakening business activity. This macroeconomic environment has reduced the euro’s relative attractiveness compared to the US, which continues to show stronger momentum.

In contrast, the United States reported stronger-than-expected economic data. PMI indexes showed expansion in both manufacturing and services. At the same time, retail sales grew by close to 1.7%, signaling that domestic consumption remains a key pillar of the economy and reinforcing confidence in the US currency.

From a technical perspective, EUR/USD is now going through a decisive phase. The pair’s inability to convincingly break above the 1.18000 resistance level keeps short-term bearish pressure in place, while traders closely monitor support levels around 1.17000 and, subsequently, 1.16500. A sustained break below these areas could accelerate new selling positions and deepen the correction.

With the upcoming meetings of the Federal Reserve and the European Central Bank just around the corner, investors are preparing for a highly sensitive week. Although market consensus points to both institutions keeping rates unchanged, any adjustment in the tone of their statements or inflation projections could generate significant movements in the foreign exchange market.

In conclusion, EUR/USD is under pressure, caught between Eurozone economic weakness and the structural strength of the US dollar, supported by solid macroeconomic data and growing safe-haven demand. As long as geopolitical tensions in the Middle East persist and oil prices remain elevated, market bias could continue favoring the greenback, leaving the euro exposed to new episodes of volatility in the sessions ahead.