EUR/USD weekly outlook: Trump signals breakthrough in Iran talks

The EUR/USD is likely to open the week with a gap higher after US president Donald Trump announced over the weekend that a peace agreement between the United States and Iran has been “largely negotiated”.

 

The comments have immediately improved global risk sentiment, with crude oil expected to fall sharply at the Asian open as traders begin pricing out the risk of prolonged disruption through the Strait of Hormuz. Equity futures are also likely to benefit from the developments, especially in Europe. For currency markets, the initial reaction points towards a softer US dollar and stronger risk-sensitive assets, allowing EUR/USD to potentially gap higher when trading resumes.

 

The devil is in the detail. We don’t know much about the agreement yet.

 

Trump Announces Progress on Iran Agreement

 

Trump said on Saturday that “final aspects and details” of a Memorandum of Understanding were still being discussed, but added that the Strait of Hormuz would reopen as part of the deal.

 

“An Agreement has been largely negotiated, subject to finalisation between the United States of America, the Islamic Republic of Iran, and the various other Countries,” Trump wrote on his social media platform.

 

The announcement followed intense diplomatic efforts involving Pakistan, Gulf states and Israel. According to reports, Iran and Pakistan submitted a revised proposal to Washington aimed at ending the conflict and restoring shipping access through Hormuz.

 

The broader framework reportedly includes a formal declaration ending the war, followed by negotiations over Iran’s nuclear programme over the next two months.

 

EUR/USD outlook: why the euro could rally

 

The FX market reaction is likely to reflect improving appetite for risk.

 

A reduction in geopolitical tensions typically weakens the dollar’s safe-haven appeal, while falling oil prices help support currencies or energy importers and the broader market confidence. With crude oil expected to open sharply lower, investors may rotate back into EU equities and higher-beta currencies at the expense of defensive dollar positioning.

 

That could allow the EUR/USD to push higher early in the week, especially if liquidity conditions during the Asian session exaggerate the initial move.

 

There is also a secondary macro effect at play. Lower energy prices would help ease global inflation pressures, potentially reviving expectations that the Federal Reserve may cut rates in the months ahead.

 

Markets Still Need More Detail

 

Despite the optimism, traders are still operating with limited information.

 

Iranian officials have continued to publicly insist that control over the Strait of Hormuz will remain under Tehran’s authority, while Iranian state-linked media described Trump’s assertion of a near-final agreement as “inconsistent with reality”.

 

There are also unresolved issues surrounding uranium enrichment, sanctions relief, frozen Iranian assets and the future structure of any nuclear negotiations.

 

Reports suggest Tehran has requested the release of billions of dollars in frozen assets, compensation for war damages and an end to the US blockade of Iranian ports before fully committing to a broader settlement.

 

For now, however, markets appear willing to focus on the immediate positives. After weeks of geopolitical escalation and fears of a wider regional conflict, it looks like investors finally have a credible headline pointing towards de-escalation.

 

That may be enough to push EUR/USD higher at the Monday open, although traders will still need confirmation and detail.

 

Technical EUR/USD outlook

 

From a technical analysis perspective, the EUR/USD continues to hold within a broader medium-term range. Key resistance is seen around the 1.1800 region. Buyers have so far defended the 1.1570 key support area successfully, and as long as that level remains intact on a daily closing basis, the pair could stabilise and attempt another move higher towards 1.1700 and potentially 1.1800 resistance.

 

 

On the downside, a sustained break below 1.1570 is needed to shift the near-term technical EUR/USD outlook more decisively bearish and expose the 1.1500 area. Until then, dips may continue to attract buyers. A break back above 1.1700 would strengthen the bullish case further, while a move through 1.1800 could open the door towards fresh multi-month highs.

 

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R