The Euro rose against the US Dollar for a seventh straight day on Tuesday. EUR/USD moved above 1.1800, its highest level since the Middle East war began in late February, after reports pointed to possible new US-Iran peace talks.
Multiple sources reported continued contact between Iran and the US. Reuters said US and Iranian delegations could return to Pakistan to resume peace talks, which supported risk appetite.
Focus Shifts To Us Inflation Data
Attention is turning to the US Producer Price Index (PPI) for March, following the consumer price data released on Friday. If the PPI matches expectations, it may add support for calls for higher Federal Reserve interest rates.
Earlier on Tuesday, inflation reports from Germany and Spain reflected the effects of the war in Iran. European Central Bank President Christine Lagarde is due to speak at an IMF meeting later on Tuesday.
Technically, the 4-hour MACD showed an expanding positive histogram, while the RSI moved into overbought levels. Resistance is seen at 1.1825, then near 1.1930, with support at 1.1720-1.1730, then 1.1650 and 1.1610.
We remember this period in mid-April 2025 when optimism around potential US-Iran peace talks was driving risk appetite. The EUR/USD pair was pushing above 1.1800, a level not seen since the conflict began earlier that year. This bullish momentum was a key focus, though technical indicators were already flashing some warning signs of a move that was overextended.
Today The Setup Looks Different
Looking back, we know the overbought RSI signal proved to be the more telling indicator for what was to come. Those initial peace talks in Pakistan ultimately faltered, and the hot US inflation figures from March 2025 did indeed lead the Federal Reserve to hike rates twice more by that summer. This policy divergence caused EUR/USD to retreat sharply from its highs, falling back below 1.1500 by August of last year.
Today, the landscape is much different, which should guide our strategy for the coming weeks. Recent data shows US inflation has cooled significantly to 2.8% as of March 2026, while the Federal Reserve has been on hold for six months with its key rate at 5.75%. The US unemployment rate has also ticked up slightly to 4.1%, suggesting the economy is finally slowing from last year’s aggressive tightening cycle.
Given that both the Fed and the ECB have now signaled a prolonged pause, we anticipate a period of lower volatility and range-bound price action in EUR/USD. For the next few weeks, derivative traders should consider strategies that benefit from this stability, such as selling out-of-the-money strangles or setting up iron condors. The conditions for explosive directional moves that we saw this time last year are simply not present right now.
The main risk to this view is any change in forward guidance from central bankers, particularly concerning the timing of potential rate cuts later this year. We will be watching upcoming labor market reports very closely for any further signs of economic weakness. A surprisingly soft jobs number could reignite rate cut speculation and bring directional traders back into the market, making cheap, long-dated puts a reasonable portfolio hedge.
