For the second day in a row, the EUR/USD pair is testing the 1.16 level, pressing against the 1.1630 resistance level (the upper line of the Bollinger Bands indicator on the D1 timeframe). Geopolitical developments and comments from Jerome Powell, who spoke yesterday before the U.S. House of Representatives, have played into the hands of EUR/USD bulls. Additionally, PMI and IFO indices supported the euro by reinforcing expectations that the European Central Bank will adopt a wait-and-see approach starting with the July meeting.
Let's begin with geopolitics. It seems that the 12-day war between Israel and Iran has finally come to an end. Although both sides continued to accuse each other of violating the ceasefire yesterday, the situation stabilized shortly afterward. Media and social networks remain divided on whether the operation was worth it and if the declared goals were achieved. However, such debates no longer concern EUR/USD traders — on the currency market, the key point is that the ceasefire is holding. Yesterday, the U.S. President expressed strong frustration (even cursing live on air) over the continued exchange of strikes after the ceasefire had been announced. Nonetheless, by the second half of the day, both Iran and Israel stated they were prepared to observe the ceasefire, and genuine silence followed. Whether this peace will last is, as they say, a rhetorical question. But for now, the situation is favoring EUR/USD buyers amid increased demand for risk assets.
Meanwhile, the dollar came under pressure yesterday in response to Federal Reserve Chair Jerome Powell's speech before the House of Representatives (his second appearance is scheduled today in the Senate). Essentially, Powell reiterated the main points expressed after the June FOMC meeting. The key message was that the Fed will not rush to cut interest rates, as the regulator needs time to assess the inflationary impact of the newly imposed tariffs. According to him, the effect could be either persistent or short-lived. At the same time, Powell declined to confirm the Fed's median forecast (dot plot), which suggests two rate cuts by year-end. He emphasized that "everything will depend on the state of the economy," noting that lower inflation readings and a cooling labor market would support "an earlier rate cut."
In theory, such rhetoric should have supported the greenback, since Powell essentially indicated that a wait-and-see approach might persist through the end of the year, contrary to the above-mentioned dot plot. However, the dollar reacted negatively, as Powell also acknowledged the potential for stagflation, stating that the tariff hikes "will lead to rising prices and negatively affect economic activity."
These remarks came alongside the release of weak Conference Board consumer confidence data, which landed in negative territory. After a surprise increase in May (to 98.4), analysts had forecast further growth in June — up to 99.4. Instead, the index dropped sharply to 93.0.
Following this release, the dollar came under additional pressure.
Meanwhile, the euro was supported by PMI and IFO indicators, helping EUR/USD buyers maintain upward momentum. Specifically, Germany's manufacturing PMI exceeded expectations, rising to 49.0. The German services PMI also approached the 50.0 threshold, climbing to 49.4. The euro area services PMI even returned to expansion territory, reaching 50.0.
Germany's IFO Business Climate Index increased for the sixth consecutive month, rising in June to 88.4 — the highest since June of last year. The IFO Expectations Index rose for the second month in a row, jumping to 90.7 — a peak not seen since April 2023.
The overall fundamental backdrop enables EUR/USD buyers to challenge the 1.16 level and test the 1.1630 resistance level. However, for the price to break higher on a sustainable basis, a strong news catalyst is needed — for example, a sharp slowdown in the core PCE index (due Friday, June 27), or a significant downward revision of U.S. Q1 GDP data (final estimate due tomorrow, June 26). Without a powerful trigger, the 1.1630 level is unlikely to be breached.
Technical Outlook: On the daily chart, EUR/USD remains positioned between the middle and upper lines of the Bollinger Bands indicator and above all lines of the Ichimoku indicator, which has formed a bullish "Line Parade" signal. A similar setup is visible on the weekly chart. All of this supports a preference for long positions. Corrective pullbacks should be used to open longs, with the first and, for now, only target at 1.1630 (the upper Bollinger Bands line on D1). The next price barrier lies at 1.1700 (upper Bollinger Bands line on W1). However, to break through this level, EUR/USD buyers will need a compelling news driver to consolidate above the 1.1630 target and open the path toward the 1.17 level.
