EUR/USD, Oil Forecast: Two trades to watch

EUR/USD rises ahead of Fed minutes. Can It Last?

EUR/USD is edging higher above 1.1425 on Wednesday; however, its recovery from the yearly low lacks momentum. Investors look ahead to the minutes from the Federal Reserve's June meeting, the first under Chair Kevin Warsh,  as the next catalyst, while largely looking through renewed hostilities between the U.S. and Iran.

Iran's Revolutionary Guard has reportedly attacked U.S. military sites in Bahrain and Kuwait after Washington launched a new wave of strikes in response to Iranian attacks on tankers transiting the Strait of Hormuz.

Despite the renewed escalation, the FX market reaction has been relatively muted. While oil prices have moved higher, the U.S. dollar has failed to attract notable safe-haven demand and the euro has remained resilient. This suggests investors continue to view the latest flare-up as a temporary setback rather than the collapse of the broader peace process.

That said, the situation highlights how fragile the ceasefire remains, with the expiry of the interim agreement in mid-August likely to become the next major geopolitical risk event.

Attention is now turning to the release of the minutes from the June FOMC meeting. Markets viewed that meeting as more hawkish than expected, with nine of the 18 policymakers projecting at least one further rate hike before the end of 2026.

However, the minutes could prove shorter and less revealing than in previous years under Chair Kevin Warsh, who has repeatedly argued in favour of leaner central bank communication. With the post-meeting statement containing just 130 words, the minutes will provide the first detailed insight into policymakers' assessment of inflation risks and the balance of opinion within the Committee, giving them greater importance than usual.

Meanwhile, expectations for further ECB tightening have eased in recent weeks. Oil prices had previously returned to pre-conflict levels, helping inflation cool more quickly than expected. Eurozone CPI slowed to 2.8% in June from 3.2% in May, suggesting the recent inflation shock may already be fading.

PMI surveys and European Commission sentiment indicators also point to softer selling-price expectations, while sluggish economic growth and moderating wage pressures reduce the urgency for additional ECB tightening unless energy prices rise materially again.

ECB President Christine Lagarde reinforced that message at the ECB's annual forum in Sintra, saying policymakers no longer need to respond as forcefully as they did during the inflation surge of 2022. However, with geopolitical uncertainty still elevated, the ECB is likely to remain cautious while assessing whether renewed tensions feed back into inflation.

EUR/USD Forecast – Technical Analysis

EUR/USD broke below its symmetrical triangle pattern before falling beneath both the 50-day and 200-day SMAs to a one-year low of 1.1325.

Although the pair has recovered modestly, the rebound has stalled around the 1.1450 resistance zone, while the RSI remains below 50, keeping the broader bias to the downside.

Failure to break above 1.1450 could see sellers retest 1.1325. A move below that level would create a fresh lower low and expose the psychological 1.1300 level, followed by 1.1200.

Should buyers reclaim 1.1450, attention would turn to 1.1500 and the falling trendline resistance. Above there, the 50-day SMA near 1.1570 comes into focus.

Oil Jumps 3% as Renewed Middle East Tensions Revive Supply Fears

Oil prices have climbed around 3% on Wednesday, lifting Brent back above $72 per barrel after the U.S. carried out fresh airstrikes in Iran and revoked the temporary sanctions waiver that had allowed Iranian crude exports.

The latest escalation follows a series of Iranian attacks on vessels transiting the Strait of Hormuz, renewing concerns that shipping through one of the world's most important energy corridors could once again be disrupted.

The renewed tensions have placed the U.S.-Iran peace process under renewed strain and revived a geopolitical risk premium that had largely disappeared over recent weeks.

This marks a sharp reversal from the market narrative that dominated only days ago, when attention centred on rising OPEC+ production, Saudi Arabia's price cuts and expectations of a growing global supply surplus.

While OPEC+ continues to increase production, renewed security concerns surrounding the Strait of Hormuz could temporarily outweigh the improving supply outlook if shipping disruptions intensify.

The recent rebound also suggests markets may have become too complacent about geopolitical risks. Although the medium-term outlook still points towards a better-supplied oil market, the latest escalation highlights how quickly the geopolitical premium can return while the ceasefire remains fragile.

Oil Forecast – Technical Analysis

After breaking below its symmetrical triangle pattern and the 200-day SMA, oil found support around $67 before staging a recovery.

Buyers will need to reclaim the 200-day SMA near $74 to strengthen the technical outlook and bring $80 into focus, the 61.8% Fibonacci retracement of the decline from $120 to $55.

Failure to retake the 200-day SMA could see prices drift back towards support at $67. A break below that level would expose the February low near $62, followed by the psychological $60 level.