EUR/USD Tests 1.1600 as Ceasefire Reports Lift Risk Sentiment

EUR/USD jumped toward 1.1600 on Tuesday afternoon as a fresh wave of risk appetite swept across markets following reports from Israeli news outlets that a 1-month ceasefire is set to be announced. The headline triggered a sharp selloff in oil and the U.S. Dollar while lifting equities and other currencies, though the degree of follow-through varied as traders weighed how much conviction to place in a claim not yet verified by the U.S. The pair had already tested 1.1600 in premarket trade on Monday following earlier reports that U.S. strikes would pause for five days, but chopped lower through the session as clarity on the state of U.S.-Iran discussions remained elusive.

Beyond the headline-driven swings, the U.S. Dollar has been losing ground more consistently on a structural basis within the new regime established since the onset of the conflict three weeks ago. While EUR/USD remains down over 1% on the month, the pair has recovered more than 1.5% from its lows. The fading safe-haven bid for the greenback may reflect a maturing market narrative around relative central bank positioning: elevated Brent crude prices are feeding more directly into European energy costs, pulling forward ECB rate hike expectations further than the Fed's. As that repricing takes hold, the initial rush into the dollar has less reason to reassert itself, leaving the greenback without a clear catalyst to reclaim its early-March strength.

EUR/USD Daily Price History

In the above chart, EUR/USD rates are once again testing resistance at 1.1600 – a level that has capped rallies throughout March. Price action on the daily chart has carved out a series of higher lows and higher highs over the past week, and the pair looks imminently to reclaim the positive side of the 20-day EMA (exponential moving average) for the first time since February. That said, the broader downtrend from the February highs remains intact until a clean break above 1.1600 materializes. If risk sentiment clears and the pair trades through that level, the 50-day EMA above 1.1670 becomes the next upside target. A failure at resistance or a deterioration in risk appetite, however, could open up the whole of the 1.1500s, where little technical support stands in the way.

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