The EUR/USD pair is showing slight gains, remaining close to the previous day’s level near 1.1550. Market activity is subdued due to ongoing tensions in the Middle East and the anticipation of upcoming US Retail Sales data and the Federal Reserve’s policy decision. Conflict between Israel and Iran raises concerns about safety. President Trump has advised US citizens to leave Tehran because of these tensions.

The Federal Reserve’s Decision

The Federal Reserve is likely to keep interest rates steady. The focus will be on economic projections and the future path of interest rates. The Euro remains strong against major currencies, particularly the British Pound. Market sentiment is cautious, as President Trump’s comments about the Middle East have provided a small boost to the US Dollar. The US Dollar Index remains above the 98.00 mark, close to recent lows. Germany’s Economic Sentiment Index improved in June, but it hasn’t helped the Euro strengthen. Attention is on US Retail Sales data, with a projected 0.7% decrease in May owing to tariff impacts. The EUR/USD is currently in a small triangle pattern, suggesting a possible upward movement. Support levels are noted at 1.1525 and 1.1490, with a trend shift likely if these levels are breached.

US Retail Sales Data

US Retail Sales gauge consumer spending, crucial for the economy. A predicted drop of 0.7% follows previous growth. Market sentiment is cautious, affected by geopolitical issues and upcoming economic data. Traders monitoring the EUR/USD pair have seen little structural change in recent sessions, with movement confined to a narrow range around 1.1550. This sideways trend is typical due to the current market uncertainty, especially regarding the Middle East and upcoming US data. Tensions in Tehran continue to impact risk markets. With American officials urging citizens to exit the area, volatility could return quickly. Any escalation might increase interest in safe havens, boosting demand for the dollar and pressuring the euro. In previous cycles, heightened risk tends to strengthen the dollar. The Federal Reserve’s tone is now a key focus, though no interest rate changes are expected. Analysts, including ourselves, will closely examine revised projections. If updated dots indicate delayed easing or fewer cuts, dollar strength may persist in the near term. A surprising hawkish pivot could amplify this effect. While ZEW data from Germany may have improved, it’s not enough to alleviate wider eurozone concerns. Traders seem to expect that better sentiment in surveys won’t lead to increased spending or investment. However, the euro remains strong against the Pound, benefiting from political uncertainty in the UK, though this doesn’t significantly impact the dollar cross. The technical pattern in EUR/USD resembles a symmetrical triangle, indicating indecision. We are watching this closely, as breakouts from these patterns often come with momentum. Resistance at 1.1590 could signal a move upward, while support at 1.1525 and 1.1490 remains crucial for downside protection. A close below these levels could lead to a backtrack toward late April values. Retail Sales data due this week adds potential for directional movement. Forecasts predict a 0.7% decline for May, which, if accurate, could heighten concerns about consumer spending—an essential driver of economic output. If the data surprises with a sharper drop, positioning might shift, giving euro bulls a bit more room. In our view, the risks currently favor continued support for the US Dollar in the short term, given the many uncertainties present. Market sentiment, recent positioning, and the broader economic environment suggest a cautious approach. While volatility is low now, that often precedes significant moves. For those trading options or short-term futures, managing exposure around this event risk and watching implied volatility will be crucial. It will be more important to observe how prices react to the data than the results themselves. Monitor reactions around the triangle’s edges and how volume confirms or dismisses the next move. Short-term implied volatility remains low despite the risks, which could present strategic entry points for those ready to capitalize on sudden shifts. Create your live VT Markets account and start trading now.

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