On Friday (July 17), during the European session, the euro maintained a narrow, slightly weak trading range against the US dollar, hovering around 1.1436, with an intraday low of 1.1434. The US dollar index also traded sideways around 100.79, indicating a cautious market sentiment. The market movement was driven by a combination of factors, including US economic data, geopolitical tensions between the US and Iran, and expectations regarding central bank policies in Europe and the US. Cooling US economic data largely dashes hopes for a July rate hike, with disagreements remaining regarding a September hike. June US inflation data across the board missed expectations, significantly reducing market bets on a near-term Fed rate hike. Consumer inflation slowed, while producer prices unexpectedly declined. Retail sales were generally in line with market expectations, with lower oil prices dragging down gas station revenue, but auto and online retail sales remained stable. Employment was relatively strong, with initial jobless claims falling to a two-month low of 208,000. Following the data release, the market almost completely ruled out a July rate hike by the Fed, but opinions among institutions are clearly divided on whether a rate hike will resume in September. Weaker inflation should have weighed on the dollar and benefited the euro, but Middle East geopolitical risks offset this positive effect. Escalating US-Iran military conflict and disruptions to energy supply pose long-term inflation risks. This week, the US-Iran standoff continued to escalate, with the US launching multiple military strikes against Iran, and Iran retaliating by attacking US military bases in neighboring countries. Iran has demanded that the Houthi rebels in Yemen prepare to blockade the Red Sea oil shipping route in response to Trump's statement that the US will authorize military strikes against Iranian bridges and power infrastructure, forcing Iran back to the negotiating table. The Red Sea is a crucial global energy transport route; disruption to shipping would further tighten the already strained global oil supply, reigniting concerns about high global inflation. Geopolitical risks support the safe-haven appeal of the US dollar while limiting the euro's rebound, adding uncertainty to the outlook for monetary policy in Europe and the US. ECB officials released hawkish but restrained signals, limiting the euro's upside potential. ECB Governing Council member and Bundesbank President Nagel recently stated that the central bank is closely monitoring the situation in the Middle East and will decisively implement tightening policies if the risk of a second wave of inflation emerges. However, according to the FXS speech tracking index, his hawkish rating was only 6.4, lower than the historical average of 7.2, indicating a significantly softer tone compared to previous statements. Nagel emphasized that monetary policy will remain vigilant, but also mentioned the multiple uncertainties brought about by the geopolitical situation, suggesting a weakening of the ECB's determination to tighten policy. The market interprets this as the central bank retaining the option to raise interest rates but refraining from aggressive action. Lacking strong policy support, the euro is unlikely to experience a sustained upward trend. Technical analysis: Short-term range-bound trading, with a medium-term downtrend target of 1.1260. (EUR/USD Daily Chart Source: FX678) The EUR/USD pair has formed a complete trading range around 1.1458, currently trading between the lower limit of 1.1430 and the upper limit of 1.1455. Two clear price paths are emerging: if the price breaks upwards from the range, a corrective rebound will begin, with the first target at 1.1465, followed by a deeper pullback to 1.1260; if it breaks downwards directly, a bearish trend will begin, with the downside target also at 1.1260. On the indicator front, the MACD signal line is above the zero line but continues to turn downwards, indicating continued bearish momentum and confirming the medium-term downtrend. The exchange rate has completed a round of decline, reaching a low of 1.1430, and is currently forming a new trading range above this support level. The intraday trading range is expected to widen to 1.1400-1.1455, with further downward pressure expected after the consolidation ends, potentially leading to a pullback to 1.1260. The Stochastic Oscillator signal line has been steadily approaching 80 from above 20, reflecting only a slight short-term correction and failing to reverse the overall bearish structure. Summary Considering both fundamentals and technicals, the euro/dollar pair received limited support from moderate US inflation data on Friday. The ongoing US-Iran geopolitical conflict continues to provide both inflationary and safe-haven support, limiting the euro's rebound. US employment remains resilient, and market expectations for a September Fed rate hike remain divided. The hawkish stance of ECB officials has weakened, resulting in a lack of sustained upward momentum for the euro. Technically, the exchange rate is expected to consolidate narrowly between 1.1400 and 1.1455 in the short term, with a clear medium-term bearish trend. The key downside target is 1.1260. Investors should closely monitor developments in the Middle East geopolitical situation and subsequent inflation and employment data from Europe and the US.