The 1.17000 realm in the EUR/USD is a battlefield as of this writing. The EUR/USD which began the month of April near the 1.15620 vicinity went higher as financial institutions digested some of the concerns they had about the Iranian war, yet clarity near-term remains nervous. A high of around 1.18500 was seen on the 17th of April, but since then from a technical perspective selling has developed with some force.
Thus, when overall sentiment is judged for the past handful of weeks, while upside may be the talking point and gains pointed to, the EUR/USD has actually faced selling pressure with a shadow over sentiment that remains less than bright. As the month of May gets set to begin plenty of questions are ahead. And the problem for financial institutions and large players is that the questions remain hidden, this because the potential of new developments remain worrisome.
Headwinds and the 1.17000 Barometer
Yes, the EUR/USD gained steadily in early April and had fast velocity upwards for the first two weeks. However, a lot of the gains in the EUR/USD occurred over the span of only a few days. On the 7th of April the EUR/USD was near the 1.15225 mark, but by the end of the day was traversing 1.16850. The EUR/USD climbed a couple of more times after the 7th as sentiment shifted and the ceasefire in Iran proved to be solid, but optimism turned into caution once again after highs were hit on the 17th.
As May gets set to start the Iranian ceasefire is holding, but it has become clear economic pressure via the Hormuz Strait turmoil is a focal point. The price of WTI Crude Oil has once again reached higher levels, and as this has happened the USD has become stronger via risk adverse conditions. Technical traders who are focused solely on EUR/USD charts may argue, but sentiment continues to show it is looking for positive impetus for more buying to occur. In the meantime a lack of optimism because of higher energy costs is causing problems in Forex and the EUR/USD has not been spared.
Federal Reserve and Attention Elsewhere
The Federal Reserve will not change its interest rate policy later today during the FOMC Statement.
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The U.S Fed will remain cautious and likely will say it doesn’t have a clear roadmap because of higher energy costs and its effect that will come via inflation.
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This probably will start to erode confidence in the EUR/USD’s ability to move higher too in the near-term.
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The perception that interest rates in the U.S will remain firm in the coming months may become a genuine consideration of financial institutions.
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The EUR/USD did well in the first couple of weeks in April, but the past two weeks have seen cautious attitudes grow. Lower U.S interest rates are not coming soon.
EUR/USD Outlook for May 2026:
Speculative price range for EUR/USD is 1.15800 to 1.18600
Forex trading in the broad markets has been difficult for day traders the past two months, but it hasn’t been any easier for financial institutions. Nervous trading is likely to remain strong in the coming weeks, particularly if the economic pressure the U.S applies to Iran causes higher energy prices. Financial institutions which believed that a ceasefire would decrease risks have started to realize that inflation concerns are valid. The EUR/USD around the 1.17000 level should be watched.
While the price momentum upwards was solid and financial institutions still may believe the EUR/USD is undervalued, they will need positive news developments to try and ride momentum upwards. The ability to reach a high of nearly 1.18515 on the 17th of April may be hard to produce until what is perceived as good news is heard. While U.S equity indices are doing well for the moment, this has not translated into a global risk on scenario. The month of May is likely to remain challenging and traders need to stay realistic regarding their targets. Near-term nervousness may translate into weeks long anxiousness in May. Choppy conditions should be planned for in the EUR/USD.
