A seemingly "basically agreed" US-Iran deal hides huge differences? After the euro gapped up, beware of these three "time bombs."
2026-05-25 11:38:12
US President Trump announced over the weekend that a peace agreement between the US and Iran had been "fundamentally agreed upon." As a result, the euro opened sharply higher against the dollar on Monday (May 25), rising as much as 0.43% to $1.1648, reversing the declines of the previous two trading days. It is currently up 0.34% at $1.1637. Oil prices initially plunged 6%, falling below the $100 mark to $97.66 per barrel, as markets hoped for an agreement between the US and Iran to reopen the Strait of Hormuz. This partially eased inflation concerns and pressure for interest rate hikes, and also reduced demand for the dollar as a safe haven.
Trump said on Saturday that the “final aspects and details” of the memorandum of understanding were still under discussion, but added that the Strait of Hormuz would be reopened as part of the agreement. He wrote on social media, “The agreement is essentially finalized, pending finalization by the United States, Iran, and other countries.” This statement came after intensive diplomatic efforts from parties including Pakistan, Gulf states, and Israel.
Iran and Pakistan have reportedly submitted a revised proposal to Washington aimed at ending the conflict and restoring shipping lanes through the Strait of Hormuz. The broader framework reportedly includes a formal declaration to end the conflict, followed by negotiations on Iran's nuclear program over the next two months.
The reaction in the foreign exchange market likely reflects an improvement in risk appetite. Easing geopolitical tensions typically weaken the safe-haven appeal of the dollar, while falling oil prices help support energy-importing currencies and broader market confidence. With crude oil prices falling sharply, investors may shift back to EU stocks and higher-beta currencies, reducing defensive dollar positions. This pushed the euro higher against the dollar early in the week, especially if liquidity conditions during the Asian session exaggerated the initial move. Furthermore, a secondary macroeconomic effect is at play: lower energy prices will help alleviate global inflationary pressures and could reignite expectations of a Federal Reserve rate cut in the coming months.
Despite optimistic market sentiment, traders still face the problem of limited information. Iranian officials continue to publicly insist that control of the Strait of Hormuz will remain in Tehran's hands, while Iranian state media claims that Trump's statements about a near-agreement being "inconsistent with the facts." Issues such as uranium enrichment, sanctions waivers, frozen Iranian assets, and the future structure of any nuclear negotiations remain unresolved.
According to reports, Tehran is demanding the release of billions of dollars in frozen assets, compensation for losses, and an end to the US blockade of Iranian ports before fully committing to a broader solution.
Currently, the market seems willing to focus on the positive factors at hand. After weeks of escalating geopolitical tensions and concerns about broader regional conflict, investors have finally seen a credible message pointing to a de-escalation.
From the daily chart, the euro is currently trading around 1.1635 against the US dollar, in a consolidation phase after a recent rebound from lows, with multiple technical indicators showing neutral to weak signals.
(Euro to US Dollar, Source: FX168)
Regarding the moving average system, the short-term moving average MA5 (1.1616) is roughly the same as the current price, MA10 (1.1647) is slightly higher than the current price, and MA20 (1.1686), MA50 (1.1656), MA100 (1.1698), and MA200 (1.1680) are all above the current price, forming short-term resistance. This arrangement of "price below all major moving averages" indicates that the Euro/USD pair is under significant short-term pressure and is in a weak consolidation pattern.
In conclusion, the news that a basic agreement had been reached between the US and Iran provided a short-term boost to the euro against the US dollar, and expectations of easing geopolitical risks drove the euro higher. However, issues such as Iran's insistence on control of the Straits and the asset freeze remain unresolved, and whether the agreement will ultimately be implemented remains uncertain.
In the short term, the euro's exchange rate against the dollar will depend on the substantive progress of the US-Iran negotiations and changes in market expectations regarding the Federal Reserve's policies.
At 11:34 AM Beijing time on May 25, the euro was trading at 1.1637/38 against the US dollar.
Trump announces progress on US-Iran agreement: Straits to reopen, nuclear negotiations to continue.
Trump said on Saturday that the “final aspects and details” of the memorandum of understanding were still under discussion, but added that the Strait of Hormuz would be reopened as part of the agreement. He wrote on social media, “The agreement is essentially finalized, pending finalization by the United States, Iran, and other countries.” This statement came after intensive diplomatic efforts from parties including Pakistan, Gulf states, and Israel.
Iran and Pakistan have reportedly submitted a revised proposal to Washington aimed at ending the conflict and restoring shipping lanes through the Strait of Hormuz. The broader framework reportedly includes a formal declaration to end the conflict, followed by negotiations on Iran's nuclear program over the next two months.
Euro/Dollar Outlook: Why the Euro Rebounded
The reaction in the foreign exchange market likely reflects an improvement in risk appetite. Easing geopolitical tensions typically weaken the safe-haven appeal of the dollar, while falling oil prices help support energy-importing currencies and broader market confidence. With crude oil prices falling sharply, investors may shift back to EU stocks and higher-beta currencies, reducing defensive dollar positions. This pushed the euro higher against the dollar early in the week, especially if liquidity conditions during the Asian session exaggerated the initial move. Furthermore, a secondary macroeconomic effect is at play: lower energy prices will help alleviate global inflationary pressures and could reignite expectations of a Federal Reserve rate cut in the coming months.
The market still needs more details: Iran insists on control of the Straits, and issues such as asset freezes remain unresolved.
Despite optimistic market sentiment, traders still face the problem of limited information. Iranian officials continue to publicly insist that control of the Strait of Hormuz will remain in Tehran's hands, while Iranian state media claims that Trump's statements about a near-agreement being "inconsistent with the facts." Issues such as uranium enrichment, sanctions waivers, frozen Iranian assets, and the future structure of any nuclear negotiations remain unresolved.
According to reports, Tehran is demanding the release of billions of dollars in frozen assets, compensation for losses, and an end to the US blockade of Iranian ports before fully committing to a broader solution.
Currently, the market seems willing to focus on the positive factors at hand. After weeks of escalating geopolitical tensions and concerns about broader regional conflict, investors have finally seen a credible message pointing to a de-escalation.
EUR/USD Daily Technical Analysis
From the daily chart, the euro is currently trading around 1.1635 against the US dollar, in a consolidation phase after a recent rebound from lows, with multiple technical indicators showing neutral to weak signals.
(Euro to US Dollar, Source: FX168)
Regarding the moving average system, the short-term moving average MA5 (1.1616) is roughly the same as the current price, MA10 (1.1647) is slightly higher than the current price, and MA20 (1.1686), MA50 (1.1656), MA100 (1.1698), and MA200 (1.1680) are all above the current price, forming short-term resistance. This arrangement of "price below all major moving averages" indicates that the Euro/USD pair is under significant short-term pressure and is in a weak consolidation pattern.
Geopolitical easing boosted the euro, but details of the agreement remain a key variable.
In conclusion, the news that a basic agreement had been reached between the US and Iran provided a short-term boost to the euro against the US dollar, and expectations of easing geopolitical risks drove the euro higher. However, issues such as Iran's insistence on control of the Straits and the asset freeze remain unresolved, and whether the agreement will ultimately be implemented remains uncertain.
In the short term, the euro's exchange rate against the dollar will depend on the substantive progress of the US-Iran negotiations and changes in market expectations regarding the Federal Reserve's policies.
At 11:34 AM Beijing time on May 25, the euro was trading at 1.1637/38 against the US dollar.
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