A ceasefire between the US and Iran has bolstered risk sentiment, but the Federal Reserve is secretly undermining it – can the euro break through with Lagarde's help?
2026-06-29 13:42:09
On Monday (June 29) during the Asian session, the euro fluctuated at low levels against the US dollar, currently trading around 1.1385, without any clear directional breakout.
Investors are simultaneously digesting the latest developments in the Middle East geopolitical situation and eagerly awaiting ECB President Christine Lagarde's speech to determine if there have been any subtle shifts in the central bank's policy stance. The latter half of the week will also see the release of US June employment data, leaving the market in a wait-and-see mode.
A U.S. official reported on Monday that the U.S. and Iran have agreed to temporarily "cease hostilities" after a brief exchange of fire near the Strait of Hormuz and plan to hold face-to-face talks in Doha, Qatar, on Tuesday.
This news eased market concerns about an immediate escalation of the conflict and provided some support for risk sentiment.
However, Iranian Foreign Minister Araqchi immediately took a hard line, reiterating that the Strait of Hormuz's jurisdiction and passage rights belong entirely to Iran, and warning that any attempt to change the passage route of the waterway would trigger "tension and escalation".
This means that although geopolitical risks have eased in the short term, the fundamental contradictions have not been resolved, and uncertainties in the energy supply chain remain.
Recent escalation of tensions in the Middle East has driven up energy and commodity prices, further exacerbating global inflation expectations.
Market concerns about supply chain disruptions and rising risk aversion will continue to support price pressures.
Against this backdrop, and more importantly, earlier this month, newly appointed Federal Reserve Chairman Kevin Warsh unexpectedly displayed a hawkish stance in his policy debut, emphasizing the need to maintain higher interest rates to combat stubborn inflation, directly reversing the market's previously optimistic bets on multiple Fed rate cuts this year.
This dramatic revaluation of policy expectations has significantly enhanced the attractiveness of the US dollar, providing strong upward momentum for the dollar index.
In the short term, a stronger US dollar will put significant downward pressure on the euro, limiting its upside potential and putting greater external pressure on the Eurozone economy.
Investors should closely monitor subsequent actions by the Federal Reserve and the evolving situation in the Middle East.
The European Central Bank's annual forum officially opened on Monday, with President Christine Lagarde delivering the opening address, drawing significant attention from global markets.
At a time when international oil prices have fallen significantly and global stock markets are experiencing increased volatility, investors are paying close attention to whether Lagarde will give any clear hints in her speech about the future path of interest rates, adjustments to quantitative easing policies, or asset purchase programs, in order to assess the urgency of the Eurozone's monetary policy.
If Lagarde or other central bank officials release hawkish signals, emphasizing that inflation risks remain and maintaining a relatively high interest rate stance, it could boost the euro exchange rate in the short term, helping it effectively hold the key 1.1400 level. Conversely, if their wording is cautious and dovish, or reveals a dovish tendency, suggesting room for policy easing, the euro may quickly face downward pressure, or even test lower support levels. Market volatility is expected to increase significantly.
According to the daily chart, the euro/dollar exchange rate maintains a medium-term downtrend. The price has been declining from a high of 1.1848, and recently rebounded slightly after testing a low of 1.1324. Currently, the 10-day moving average (MA10) is suppressing the price, while the 20-day and 50-day moving averages are also declining, forming a layered resistance zone above, indicating weak upward momentum for the bulls.
From a technical perspective, the MACD remains below the zero line, with the DIFF (-0.0069) slightly crossing above the DEA (-0.0056). The red bars are extremely short, indicating only a weak bullish divergence correction signal, and no effective bullish reversal has formed. The bearish dominance remains unchanged. The RSI indicator is 31.69, above the 30 oversold threshold, suggesting a slight oversold rebound in the short term. However, it has not yet broken through the 50 level, which is a key support/resistance level, limiting the upside potential.
(Euro/USD daily chart, source: FX678)
At 13:41 Beijing time on June 29, the euro was trading at 1.1388/89 against the US dollar.
Investors are simultaneously digesting the latest developments in the Middle East geopolitical situation and eagerly awaiting ECB President Christine Lagarde's speech to determine if there have been any subtle shifts in the central bank's policy stance. The latter half of the week will also see the release of US June employment data, leaving the market in a wait-and-see mode.
Geopolitical developments: US and Iran agree to suspend fighting; Doha talks about to begin.
A U.S. official reported on Monday that the U.S. and Iran have agreed to temporarily "cease hostilities" after a brief exchange of fire near the Strait of Hormuz and plan to hold face-to-face talks in Doha, Qatar, on Tuesday.
This news eased market concerns about an immediate escalation of the conflict and provided some support for risk sentiment.
However, Iranian Foreign Minister Araqchi immediately took a hard line, reiterating that the Strait of Hormuz's jurisdiction and passage rights belong entirely to Iran, and warning that any attempt to change the passage route of the waterway would trigger "tension and escalation".
This means that although geopolitical risks have eased in the short term, the fundamental contradictions have not been resolved, and uncertainties in the energy supply chain remain.
Support for the US dollar: Safe-haven demand in the Middle East coupled with a hawkish shift in the Federal Reserve.
Recent escalation of tensions in the Middle East has driven up energy and commodity prices, further exacerbating global inflation expectations.
Market concerns about supply chain disruptions and rising risk aversion will continue to support price pressures.
Against this backdrop, and more importantly, earlier this month, newly appointed Federal Reserve Chairman Kevin Warsh unexpectedly displayed a hawkish stance in his policy debut, emphasizing the need to maintain higher interest rates to combat stubborn inflation, directly reversing the market's previously optimistic bets on multiple Fed rate cuts this year.
This dramatic revaluation of policy expectations has significantly enhanced the attractiveness of the US dollar, providing strong upward momentum for the dollar index.
In the short term, a stronger US dollar will put significant downward pressure on the euro, limiting its upside potential and putting greater external pressure on the Eurozone economy.
Investors should closely monitor subsequent actions by the Federal Reserve and the evolving situation in the Middle East.
Euro uncertainty: Lagarde's speech becomes the focus of the day
The European Central Bank's annual forum officially opened on Monday, with President Christine Lagarde delivering the opening address, drawing significant attention from global markets.
At a time when international oil prices have fallen significantly and global stock markets are experiencing increased volatility, investors are paying close attention to whether Lagarde will give any clear hints in her speech about the future path of interest rates, adjustments to quantitative easing policies, or asset purchase programs, in order to assess the urgency of the Eurozone's monetary policy.
If Lagarde or other central bank officials release hawkish signals, emphasizing that inflation risks remain and maintaining a relatively high interest rate stance, it could boost the euro exchange rate in the short term, helping it effectively hold the key 1.1400 level. Conversely, if their wording is cautious and dovish, or reveals a dovish tendency, suggesting room for policy easing, the euro may quickly face downward pressure, or even test lower support levels. Market volatility is expected to increase significantly.
Technical Analysis
According to the daily chart, the euro/dollar exchange rate maintains a medium-term downtrend. The price has been declining from a high of 1.1848, and recently rebounded slightly after testing a low of 1.1324. Currently, the 10-day moving average (MA10) is suppressing the price, while the 20-day and 50-day moving averages are also declining, forming a layered resistance zone above, indicating weak upward momentum for the bulls.
From a technical perspective, the MACD remains below the zero line, with the DIFF (-0.0069) slightly crossing above the DEA (-0.0056). The red bars are extremely short, indicating only a weak bullish divergence correction signal, and no effective bullish reversal has formed. The bearish dominance remains unchanged. The RSI indicator is 31.69, above the 30 oversold threshold, suggesting a slight oversold rebound in the short term. However, it has not yet broken through the 50 level, which is a key support/resistance level, limiting the upside potential.
(Euro/USD daily chart, source: FX678)
At 13:41 Beijing time on June 29, the euro was trading at 1.1388/89 against the US dollar.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
