EUR/USD, Oil Forecast: Two trades to watch

EUR/USD edges higher ahead of Thursday's ECB rate decision

EUR/USD is edging higher towards the 1.1550 level on Tuesday, supported by expectations of a hawkish ECB this week. However, gains remain limited amid uncertainty surrounding the Middle East, which could revive safe-haven demand for the U.S. dollar.

The ECB is widely expected to raise interest rates by 25 basis points on Thursday, a move that is fully priced in after eurozone inflation accelerated to 3.2% in May.

Attention will focus on the ECB press conference for further clues regarding the outlook for interest rates. Any indication that policymakers remain concerned about inflation and are prepared to tighten policy further could provide additional support for the euro.

On the data front, German industrial production rose 0.4% month-on-month, marking its first increase since the conflict in the Middle East began. The improvement offers some encouragement for Europe's largest economy, although broader growth indicators remain subdued.

Meanwhile, the U.S. dollar has eased back from a two-month high and is trading around 99.85 against a basket of major currencies as investors await key inflation data. U.S. CPI is due on Wednesday, followed by PPI figures on Thursday, both of which could provide further insight into the Federal Reserve's policy path.

Markets are currently pricing around a 50% probability of a 25-basis-point Fed rate hike before the end of the year. Stronger-than-expected inflation data could reinforce those expectations, supporting Treasury yields and the dollar.

At the same time, market sentiment has improved modestly after President Trump said a proposal for a U.S.-Iran agreement could be announced within days. Iran has also signalled an end to military operations against Israel. However, investors remain cautious, and any renewed escalation could quickly boost demand for traditional safe-haven assets such as the U.S. dollar.

EUR/USD forecast – technical analysis

After breaking out of the symmetrical triangle pattern, EUR/USD traded in a holding pattern, but failure to break above the 250 SMA reinforced the bearish bias, and the pair broke lower to 1.15. The RSI remains below 50, supporting further downside.

Sellers will need to break below 1.15 in order to extend the bearish move towards 1.1450. The April low ahead of 1.1410, the 2026 low

Any recovery would need to recover any rebound above 1.16 and the 200 and 50 SMA around the 1.1670 level. A higher high here creates a higher high, putting the pair on a firmer footing.

Oil prices ease as Middle East tensions cool, but supply risks remain

Oil prices are easing back on Tuesday, giving up most of yesterday's gains after Israel and Iran halted strikes following the recent escalation that threatened to widen the conflict.

The pullback reflects improving sentiment around the prospect of a diplomatic resolution. However, prices remain supported by ongoing supply concerns and tight inventory levels.

Recent trade data from China showed crude oil imports fell further in April as refiners increasingly drew down inventories rather than purchasing additional barrels from overseas. The decline suggests weaker near-term import demand and helps explain why oil prices have struggled to rally more aggressively despite ongoing geopolitical risks.

A 29% year-on-year fall in Chinese imports, combined with rising U.S. exports, releases from strategic petroleum reserves and some degree of demand destruction from higher energy prices, has helped offset concerns over disrupted supply.

However, the broader supply picture remains tight. Global oil inventories continue to decline, reducing the market's buffer against future supply shocks and leaving prices increasingly sensitive to geopolitical developments.

Iran continues to keep the Strait of Hormuz effectively restricted, while Washington has maintained pressure on Iranian exports. As a result, a significant portion of global oil supply remains vulnerable to further disruption.

For now, optimism that a diplomatic agreement can be reached is preventing a more aggressive move higher in oil prices. However, if disruptions persist into next month, when seasonal driving demand typically increases and inventories are expected to tighten further, the risk of a renewed spike in crude prices could increase significantly.

In that scenario, Brent moving back above $100 per barrel would become a more realistic possibility rather than a tail risk.

Oil forecast - technical analysis

Oil trades within a symmetrical triangle pattern. The price recently faced rejection at the 50 SMA and the 38.2% Fib retracement of the 55 low and 120 high. This, combined with the RSI below 50, potentially favours a breakout to the downside of the triangle pattern.

Sellers will look to break below 88, the confluence of the rising trendline support, horizontal support, and the 50% Fib retracement level. A break below here opens the door to 80.00, the round number and the 61.8% Fib level before exposing the 200 SMA at 73.10.

Buyers would need to rise above 95 (the 38.2% fib retracement level), 97.50 SMA, and the falling trendline resistance to expose 100 (the psychological level) and 105 (the 23.6 fib level and also the mid-May swing high).