Commerzbank’s Antje Praefcke says developments linked to the Iran conflict are the main factor shaping EUR/USD, with US data having less influence. She expects the pair to remain in its recent range unless events in the Middle East clearly escalate or de-escalate.
The US data calendar includes JOLTS Job Openings, the ADP Index, and the official jobs report on Friday. JOLTS was described as “somewhat softish”, while a strong ADP reading could lift the US dollar slightly and a weaker Nonfarm Payrolls (NFP) result could weigh on it.
Iran Conflict Drives Range Trading
Praefcke notes that US employment data has been volatile in recent months and has not provided clear signals. She expects April job growth to be relatively modest, suggesting that, unless there are unexpected outliers, the figures may have limited impact on the US dollar.
She adds that other themes are secondary while the Middle East war continues without signs of ending. A clear shift in the Iran conflict, either de-escalation or renewed escalation, is presented as the main condition for EUR/USD to move out of the range seen for several weeks.
For the coming weeks of May 2026, we believe the situation in the Middle East involving Iran remains the most important factor for the EUR/USD pair. Upcoming US economic data is likely to be a secondary concern for the market. As a result, the currency pair will probably stay within its recent trading channel.
We just saw the April Nonfarm Payrolls report last Friday, which showed a gain of 170,000 jobs, slightly missing expectations but not weak enough to alter the Federal Reserve’s policy view. This type of mixed data has been common recently, leaving the US Dollar without a clear catalyst. Because of this, we don’t expect employment figures to drive any significant moves.
Positioning For Low Volatility
Given that EUR/USD has been trading tightly between 1.0650 and 1.0850, derivative traders could consider strategies that profit from low volatility. Selling out-of-the-money options, such as in an iron condor or a strangle, could be a viable approach. These strategies benefit from the pair remaining within this expected range as the options’ time value decays.
Implied volatility on one-month EUR/USD options has fallen to around 5.5%, reflecting the market’s current lack of directional conviction. While this makes selling premium attractive, it also signals that any unexpected news could cause a sharp reaction. This low volatility environment is a direct result of traders waiting for geopolitical cues rather than trading on economic numbers.
However, we must remain prepared for a sudden breakout should the situation with Iran change. We only have to look back to the sharp market reactions in late 2025 when these tensions first flared up to understand the risk. Any headline suggesting a clear escalation or a move towards diplomacy could easily push the pair out of its current range.
To protect against such a sudden move, traders could hold a small number of long-dated, out-of-the-money puts or calls. This acts as a cheap form of insurance against a sharp, unexpected move in either direction. The primary focus should be on monitoring geopolitical headlines, as these will likely trigger the next significant trend.
