The euro rose against the US dollar for a seventh day on Tuesday. EUR/USD moved back above 1.1700 and reached 1.1790, its highest level since the war began.
Reports pointing to another round of US–Iran peace talks lifted risk appetite. Donald Trump’s move to block Iran’s ports on Monday did not reverse this rise.
Us Iran Talks Boost Risk Appetite
Reuters reported on Monday that the sides were close to a deal over the weekend, but Iran’s uranium enrichment was the sticking point. The report said both countries left open the option of further talks after negotiations in Islamabad ended abruptly.
In Europe, German and Spanish inflation data were released ahead of European Central Bank President Christine Lagarde’s conference at an IMF meeting on Tuesday. In the US, attention is on March Producer Price Index (PPI) data, expected to show higher inflation pressures linked to the war.
EUR/USD was at 1.1794. The 4-hour RSI was near 72 and the MACD histogram was positive, with resistance at 1.1825 and then about 1.1930.
Support levels are seen at 1.1720–1.1730, then near 1.1650 and 1.1610. The technical section was produced with help from an AI tool.
Market Volatility And Policy Divergence
Looking back at the sharp EUR/USD rally during the US-Iran peace talks in April 2025, we are reminded how quickly geopolitical de-escalation can fuel risk appetite. That move, which pushed the pair from below 1.1700 to near 1.1800 in a matter of days, stands in contrast to today’s market. Current market complacency, with the VIX volatility index hovering near a relatively low 14.5, suggests traders are underpricing the risk of a sudden shock.
The inflationary pressures mentioned in the 2025 reports have become a persistent reality, with the latest Eurozone Harmonised Index of Consumer Prices (HICP) still stubbornly high at 2.4%. However, the policy response is now different, as European Central Bank officials are openly discussing rate cuts while the Federal Reserve remains cautious due to US inflation holding above 3%. This growing policy divergence creates a fundamental headwind for the Euro that did not exist with the same clarity last year.
Given the memory of 2025’s rapid repricing, buying cheap volatility is a logical strategy in the coming weeks. With implied volatility on one-month EUR/USD options near multi-year lows, purchasing long straddles allows a trader to profit from a significant move in either direction, be it from a policy surprise or a new headline risk. This position is relatively inexpensive protection against the current market’s calm.
For those with a directional bias, the fundamental setup favors the US dollar more than it did during the 2025 rally. We recall bulls targeting 1.1825 back then, but today, significant resistance lies much lower, around the 1.0950 mark. Buying EUR/USD put options with a strike near 1.0700 provides a defined-risk way to position for a stronger dollar if ECB rate cut expectations continue to build.
We also cannot ignore the commodity channel we saw threatened in 2025 with the port blockades. With Brent crude oil recently climbing back over $91 per barrel due to renewed OPEC+ supply discipline, any new geopolitical flare-up could quickly amplify inflation concerns. This would complicate the ECB’s planned rate cuts and introduce another vector of volatility that the market seems to be ignoring.
