After a sharp sell-off from above 1.2000 to below 1.1500, the EUR/USD pair has displayed an unusually calm and range-bound movement over the past two weeks. The currency pair is currently showing clear signs of a tug-of-war between bulls and bears, with the lingering effects of the Middle East conflict remaining a significant external factor influencing the euro's direction. During the Asian trading session on Friday, the EUR/USD traded in a narrow range around 1.1535. As tensions in the Middle East escalated, the US dollar's strength quickly returned, driving the EUR/USD from an overbought state on the daily charts in late January to an oversold condition by mid-March. Chasing extreme trends in the short term is difficult, and while the market has recovered somewhat from oversold territory, both bulls and bears have reasonable trading rationales.
From a technical analysis perspective on the weekly chart, the consolidation over the past two weeks can be seen as a temporary pause within a broader bearish trend. For those anticipating further US dollar strength or euro weakness, the weekly chart remains the primary reference framework.
For euro bulls or US dollar bears, shorter-term charts are more appealing. The 4-hour chart indicates that over the past two weeks, the EUR/USD has formed higher lows and higher highs near the recent lows, suggesting a mild bottoming formation. Although this pattern appears weak on longer-term charts, most trend reversals often begin with similar, gradual bottoming processes, reminiscent of the situation in early February when the EUR/USD formed a higher low before bears ultimately broke the pattern.
On the upside, the 1.1655 level remains a critical benchmark for gauging bullish momentum. A decisive break above this level could open the path towards 1.1750 and 1.1766.
On the downside, the psychological support level at 1.1500 has been defended effectively this week, with the area around 1.1525 providing near-term support.
The ongoing uncertainty surrounding the Middle East conflict continues to be a significant external variable for the euro. When tensions escalate, the US dollar often strengthens rapidly as a safe-haven currency, putting downward pressure on the euro. Conversely, any de-escalation or progress in diplomatic negotiations could ease the dollar's strength and provide room for a euro rebound. While concerns about a prolonged conflict persist, signals from the US administration regarding potential talks have offered the possibility of a short-term improvement in risk appetite. Traders need to adjust their positions flexibly in response to geopolitical developments.
In the near term, the EUR/USD remains in a bottoming and consolidation phase with clear divergence between bulls and bears. Euro bulls may watch for a breakout above 1.1655, while bears should monitor the robustness of the 1.1500 support level. Any developments in the Middle East situation could quickly alter market risk sentiment.
Over the medium to long term, a substantive de-escalation of the Middle East conflict or a breakthrough in diplomatic talks could pave the way for a corrective rebound in the euro. Conversely, a prolonged conflict or renewed escalation would likely sustain US dollar strength, continuing to weigh on the euro. Traders should adjust their strategies flexibly based on their time frame, risk appetite, and geopolitical dynamics, while strictly managing position risks.
As of the latest update, the EUR/USD was trading at 1.1537/38.
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