The recent declaration of a ceasefire between Israel and Iran by Donald Trump has sent a shockwave through financial markets. The EURUSD pair has experienced a rollercoaster ride. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The US announced a ceasefire in the Middle East.
- The ECB’s most feared scenario did not play out.
- Fed officials are ready to cut rates in July.
- Long trades on the EURUSD pair are relevant, with the target at 1.2.
Weekly US Dollar Fundamental Forecast
Could the announcement of a ceasefire in the Middle East be seen as a fulfillment of a wish, particularly given the circumstances surrounding it? The markets experienced significant turbulence, and the full impact is yet to be determined. Oil prices plummeted, the S&P 500 surged, and the EURUSD pair fluctuated dramatically within the 1.149–1.161 consolidation range.
Iran has stated that while there is no formal ceasefire agreement in place, it stands ready to halt the aerial bombardment if Israel adopts a similar approach. Tehran’s retaliation against the US in the form of attacks on American military bases in Qatar appears to be a symbolic gesture. Regardless of Donald Trump’s statements, Brent would have likely fallen anyway.
Meanwhile, the euro strengthened following the dissipation of concerns raised by Christine Lagarde. The ECB president stated that the oil rally would have a twofold impact: it would accelerate inflation and weaken oil demand. In essence, Lagarde painted a scenario of stagflation. According to the latest data on the PMI in the eurozone, the forecast is slowly coming to life.
Euro Area Purchasing Managers’ Indexes
Source: Bloomberg.
Without exorbitant oil prices, the Fed has no need to keep rates at 4.5%. Michelle Bowman is ready to follow Christopher Waller in supporting the idea of resuming the monetary expansion cycle as early as July. Both FOMC officials cite the inability of tariffs to raise prices and express concerns about further cooling of the labor market. They were both appointed by Donald Trump to their posts during the US President’s first term.
Michelle Bowman’s position is doubly surprising, as she was previously considered one of the Fed’s leading hawks. In September, she was the only one to vote against an aggressive 50-basis-point cut in the federal funds rate.
Jerome Powell does not bow to criticism from the US President, so the FOMC officials appointed by the US President have started to put pressure on the Fed chief. In June, ten FOMC members predicted at least two acts of monetary expansion in 2025, while seven did not expect a rate cut. The split and dovish rhetoric, along with the fall in Brent, are weighing on the US dollar.
Meanwhile, Donald Trump continues to push his agenda. He is celebrating not only the ceasefire in the Middle East but also the plunge in oil prices. The US administration is calling on American oil producers to keep prices low and repeating the slogan “Drill, Baby, Drill.” All this confirms the idea that the US President wants to see the US dollar weaken.
Weekly EURUSD Trading Plan
EURUSD bears have failed to keep the price below 1.149, confirming their weakness and allowing bulls to open long trades within the consolidation range of 1.149–1.161 and increase long trades at 1.153. These long positions can be maintained with the target at 1.2.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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