EUR/USD Price Forecast: Euro Tests 1.1700 Floor as Hormuz Crisis Hands Dollar Fresh Bid

The EUR/USD pair is sitting on a knife's edge as Monday's session unfolds, last trading around 1.1700-1.1710 after a modest Asian-hour pop into the mid-1.1740s got promptly faded. Friday's pullback from a one-and-a-half-week high near 1.1847 carried straight into the new week, and the bullish gap that opened the European session has already been mostly filled. The pair is up against a difficult tape — the U.S. Dollar Index (DXY) is grinding higher near 98.32 on safe-haven flows tied to the Strait of Hormuz mess, Brent crude is parked above $110, and the bond market has decisively repriced Fed rate-cut expectations lower. Every one of those vectors works against the euro.

The setup is a textbook battle between two competing forces. On one side, the technical structure on the 4-hour chart still favors a constructive bias — price holds above the 200-period Simple Moving Average, the Relative Strength Index sits around 53 (mildly positive without being stretched), and the MACD stays slightly in positive territory. On the other side, the macro tape is screaming "stronger dollar" through every transmission channel that matters: rising real yields, hawkish Fed positioning, surging oil prices that hammer Europe as a net energy importer, and persistent geopolitical risk that drives haven flows into Treasuries and the greenback. The result is a pair that wants to grind higher technically but keeps getting punched in the face by macro reality.

Here's the breakdown of where EUR/USD sits, what's driving the price action, and how the next few weeks could play out.

The Hormuz-Driven Dollar Bid Is Real And It's Punishing The Euro

The Strait of Hormuz situation has handed the U.S. Dollar a tactical advantage that isn't going away quickly. President Trump's "Project Freedom" rolled out Monday — a U.S. operation to guide commercial vessels stranded in the strait, but stopping short of formal naval escorts. Iran's IRGC via Al Jazeera claimed two missiles struck a U.S. warship near Jask Island. U.S. Central Command denied the strike outright and confirmed two U.S.-flagged merchant ships had successfully transited the strait. The United Arab Emirates said an Adnoc-affiliated tanker was actually the vessel hit by Iranian drones. Iran's foreign ministry warned that any U.S. military "interference" in the strait would be treated as a violation of the ceasefire and met with "full strength."

The market response was dollar-positive across the board. The DXY tested 98.80 before pulling back to 98.32, with bearish trendline resistance still capping the upside but the broader bid intact. Brent crude climbed to $111.56 (+3.13%), WTI at $102.52 — and crucially, those high oil prices benefit the U.S. dollar in ways they hurt the euro. The U.S. is now a major energy exporter, so when crude runs higher, dollar demand from energy-importing nations rises. Europe is the mirror image — a structural net importer of energy where high oil prices erode trade balances, squeeze corporate margins, and pressure household consumption.

That asymmetry is the key reason EUR/USD is struggling to extend its rally despite the technical setup pointing constructively. Vishal Chaturvedi's read at FXStreet that "escalating Middle East tensions lift the U.S. Dollar" is the through-line for every G10 cross right now, and the euro is on the wrong side of it. Christian Borjon Valencia pointed out that the same dynamic is hammering GBP/USD — sterling has dropped to two-day lows near 1.3520 with cable parking in the low 1.3500s for similar reasons.

The Technical Map: 1.1648 Is The Line That Decides Everything

The 4-hour technical structure on EUR/USD is a classic "constructive but vulnerable" setup. Here's the resistance ladder going up: 1.1750 is the immediate hurdle — that's the 23.6% Fibonacci retracement of the March-April upswing, and a sustained acceptance above this level is the trigger condition for the bulls to take real control. 1.1790 is the next stop. 1.1847 marks the recent cycle high. Above that, traders are looking at fresh extension targets in the 1.1900-1.1950 zone.

Support ladder going down: 1.1700 is the immediate psychological pivot. 1.1692 is the 38.2% Fibonacci retracement — first real support level that needs to hold to keep the structure intact. Below that, the critical confluence zone forms at 1.1648 (the 200-period SMA on the 4-hour) plus 1.1644 (the 50.0% Fibonacci retracement). Lose that combined zone on a daily close and the technical bias flips outright bearish. Below 1.1644, the next layer is the 61.8% Fibonacci at 1.1596, then 1.1528, then 1.1441.

A separate read on the same pair from Arslan Ali at FXEmpire frames the same setup with slightly different levels. He flags 1.1680 as the key support junction where the ascending trendline meets the 200 EMA — same idea, slightly different number. His upside trade idea: long above 1.1680 with a target at 1.1750 and a stop below 1.1650. The convergence around 1.1644-1.1680 as the structural floor is what matters.

The momentum read is mixed but tilting weaker. RSI heading toward 45 on Ali's read suggests bulls are losing grip. The 50 EMA has flattened — consolidation rather than continuation. The Doji indecision pattern that formed near the 1.1700-1.1710 zone tells you the market is genuinely undecided about the next directional move. Acceptance above 1.1750 flips the momentum bullish; loss of 1.1648-1.1680 flips it bearish. Right now, the pair is mid-range with no clear edge.

The Cable Cousin: GBP/USD Tells The Same Story With More Volatility

GBP/USD is moving in lockstep with EUR/USD, both reacting to the same dollar-strength backdrop but with sterling carrying additional Bank of England wildcards. Cable last traded near 1.3550 after rejection at 1.3650 resistance left a clear lower-high on the 2-hour chart. Price has slipped below the 50 EMA and is now testing trendline support at 1.3500, with the 200 EMA still lurking below. The rejection wick near the highs flags supply pressure, and the RSI turning lower from 60 confirms bulls are losing momentum.

The Bank of England left rates unchanged in April, but one MPC member voted to hike — that's a hawkish dissent that mirrors what's happening at the Fed. The pound carries higher beta to oil-driven inflation through the energy import channel, which means the same Hormuz dynamic that's pressuring the euro is amplified for sterling. Trade idea on cable: short below 1.3550 with target 1.3450 and stop above 1.3620. Below 1.3500, the next level to watch is 1.3448.

For traders watching the EUR complex, the GBP/USD action is a useful sentiment proxy. If cable cracks 1.3500 hard, EUR/USD loses its 1.1700 floor in sympathy.

The Fed Story: Why Rate Cuts Got Pushed Out

The Federal Reserve is the gating variable for EUR/USD direction over the next 60-90 days, full stop. The Fed left rates unchanged at the prior meeting, but four FOMC members dissented — that's the highest dissent count in years and tells you the committee is split internally about how to handle the inflation pulse from oil and tariffs. CME Group data shows just a 5.1% probability of a rate cut to 3.25-3.50% in June. 94.9% of market participants expect rates held steady at 3.50-3.75%. Traders are now pricing the possibility of rate hikes by 2027 as a tail scenario.

Higher-for-longer is the Fed's current stance, and it's dollar-positive across the board. The U.S. 10-year Treasury yield ticked above 4.41% Monday from 4.38% at Friday's close. The two-year sits north of 3.94%. Real yields rising mechanically reduce the appeal of holding non-dollar currencies — particularly the euro, where the European Central Bank is widely expected to hike rates in June.

That ECB hike expectation is what's keeping EUR/USD from collapsing despite the dollar bid. Markets have aggressively priced in the ECB responding to the energy shock more forcefully than they did in 2022. Commerzbank's Thu Lan Nguyen has flagged this exact dynamic — the euro's resilience near pre-war levels, despite Hormuz remaining blocked and Brent above $100, comes from a combination of dollar weakness across G10 crosses and euro strength against the same basket. But Nguyen is openly skeptical of the market pricing in three ECB hikes by year-end. Her base case: probably just one hike unless Hormuz stays closed through year-end, because the economic burden from the energy shock plus the eurozone debt load makes aggressive tightening politically and economically untenable.

The key Nguyen takeaway for EUR/USD traders: anyone betting on higher EUR/USD levels should focus primarily on dollar weakness, not euro strength. A 25-basis-point ECB hike in carry differential is functionally insignificant — the move higher needs to come from the dollar side of the equation, and right now the dollar isn't cooperating.

The BNP Paribas Long-Term Forecast: 1.21 By Q4 2026

The structural euro-bull case lives further out the curve. BNP Paribas economists project the U.S. economy growing above potential in 2026 at 2.4% GDP (up from 2.1% in 2025), with inflation at 3.3% persisting through 2028 — driven primarily by the oil price shock and tariffs, with the impact slightly less significant than initially feared. They expect the Fed Funds target range to remain steady at 3.5%-3.75% with the FOMC shifting to a "two-sided outlook" — equally ready to hike or cut depending on data.

The EUR/USD forecast: 1.21 by Q4 2026 and 1.25 by Q4 2027. That's roughly a 3-7% appreciation from current levels over the next 12 months and 6-7% over the next 24 months. The driver isn't ECB tightening — it's broader diversification away from the dollar combined with gradual normalization of the Middle East situation. BNP's base case assumes Hormuz tensions ease but oil prices remain elevated, creating a "persistent price tensions" backdrop that benefits diversifiers (gold, euro, yen) at the dollar's expense over the medium term.

The catch: that forecast requires the Middle East situation to actually normalize. If Hormuz stays a chronic flashpoint, the dollar's safe-haven premium stays embedded and EUR/USD struggles to climb out of the 1.16-1.20 channel.

The Three Scenarios Mapped Out

Path one — bullish breakout. EUR/USD holds above 1.1700, mounts a sustained move above 1.1750, and accepts that level as the new floor. That sequence opens 1.1790 then the cycle high at 1.1847 as the next targets. Above 1.1847, traders look at 1.1900-1.1950 as the extension zone. Trigger conditions: weak U.S. nonfarm payrolls Friday May 8 that revives Fed cut bets, dovish Fed speakers this week, ECB officials reinforcing the June hike message and signaling further tightening, oil cooling below $105, and Hormuz tensions fading.

Path two — sideways grind. The pair stays trapped between 1.1648 and 1.1750, oscillating headline-by-headline. Statistically the most likely path because the cross-currents are so balanced — euro strength on ECB hike expectations roughly offsetting dollar strength on yield/oil/safe-haven flows. ETF flows in dollar-denominated assets stay neutral, Fed speakers split their messaging, and the next major directional move waits for either the May 12 CPI print or a definitive Hormuz resolution.

Path three — bearish breakdown. EUR/USD loses 1.1700 decisively, breaks the 1.1648 confluence on a daily close, and triggers the path to 1.1596 (61.8% Fib). Below that, 1.1528 and 1.1441 open up as deeper targets. Trigger conditions: hot U.S. NFP that kills the rate-cut narrative, fresh Hormuz escalation that drives oil above $115, ECB officials walking back the June hike messaging, hot U.S. CPI on May 12, or a sustained dollar bid that takes DXY through 98.80 and toward 99.50.

The Macro Calendar That Will Move The Needle

This week's release schedule is loaded with euro-relevant data points. Friday May 8 brings the marquee event — April Nonfarm Payrolls, U.S. unemployment rate, and University of Michigan May inflation expectations. A weak number on payrolls (sub-100K) sends yields lower, dollar weaker, and likely launches EUR/USD through 1.1750. A hot number (200K+) breaks 1.1648 and opens the trapdoor to 1.1596.

Earlier in the week, April Services PMI and March JOLTS drop May 5. April ADP Nonfarm Employment Change comes May 6. Initial jobless claims print May 7. The U.S. Treasury borrowing plans announcement and a parade of Fed speakers also land this week. April CPI on May 12 is the next big inflation tell. April PPI May 13. May Manufacturing and Services PMI May 21.

For the euro side, ECB officials' commentary in the back half of this week will be critical. Any walk-back of the June hike messaging — particularly anything questioning whether the energy shock genuinely warrants tightening — sends EUR/USD lower fast. Any reinforcement of the hawkish stance, particularly with explicit signals about further hikes through year-end, gives the bulls fresh ammunition.

The Position View: Hold-To-Sell On Rallies, Lean Bearish Below 1.1700

Here's the honest read. EUR/USD at 1.1700-1.1710 is sitting in a technical no-man's-land. The 4-hour structure points modestly higher, the 200-SMA at 1.1648 is still defended, and ECB hike expectations provide a structural floor. But the macro cocktail is dollar-positive across every transmission channel: rising yields, hawkish Fed, surging oil prices that hurt the euro disproportionately, persistent Hormuz risk premium, and DXY grinding back toward 98.80.

The Bart Melek read at TD Securities — that the latest geopolitical headlines didn't reassure markets, raised inflation concerns, and triggered hawkish rate signals — applies directly to the euro. Every uptick in oil prices is a tax on European consumers and a windfall for the U.S. economy via energy exports. That's a macro asymmetry that doesn't resolve in 48 hours.

Position view: hold core long-euro positions but trim aggressively into rallies toward 1.1750-1.1790. Avoid adding fresh longs above 1.1730 without a confirmed daily close above 1.1750. Stop-loss discipline below 1.1648 is non-negotiable — a daily close under that level changes the structural setup and opens 1.1596 as the next stop. Tactical traders can short rallies into the 1.1750-1.1790 zone with stops above 1.1850 and targets at 1.1700 first, then 1.1648.

The longer-term BNP Paribas case for EUR/USD at 1.21 by Q4 2026 and 1.25 by Q4 2027 remains intact because the dollar diversification thesis hasn't broken — but it requires the Middle East to genuinely de-escalate, which the Monday tape isn't confirming. Until Hormuz resolves and oil pulls back below $100, the dollar keeps the safe-haven premium and the euro stays capped.

The single number that decides the next 5-7 trading sessions is Friday's April Nonfarm Payrolls. A soft print revives rate-cut bets and sends EUR/USD back through 1.1750 on its way to 1.1847. A hot print kills the bullish setup and opens 1.1596 as the next target. Everything else this week — Fed speakers, ECB commentary, Hormuz headlines, Middle East tanker incidents — is noise around that single release.

The technical structure says one thing, the macro says another, and the resolution comes Friday morning at 8:30 AM Eastern. Until then, EUR/USD is a hold with a sell bias on strength and a clear stop discipline below 1.1648. Bullish bias only re-enters the picture above a confirmed 1.1750 daily close. Outright bearish below 1.1644.

For the longer-term framework, the euro still has a structural appreciation path against the dollar based on diversification flows and ECB tightening, but that path is going to be slow, choppy, and entirely dependent on oil normalizing. Right now, oil is parked above $111 and Hormuz is contested daily. That backdrop favors the dollar tactically, even if the structural call points the other way.

That's TradingNEWS