The Euro (EUR) recovered early losses against the Canadian Dollar (CAD), trading around 1.6170 during the European session on Monday, as easing fears of a prolonged US-Iran conflict supported risk sentiment and the Euro's strength. Mediation efforts by Qatar, Oman, and Pakistan to de-escalate tensions were confirmed by an Iranian Foreign Ministry spokesperson, contributing to the improved market mood and impacting oil prices, which traded 2.13% higher near $73 before retreating from earlier highs near $75.00. The Canadian Dollar gave back most of its early gains as oil prices eased, and attention shifted to the upcoming Bank of Canada (BoC) policy announcement, where rates are expected to remain unchanged at 2.25% [1].
In the broader currency market, the Euro gained 0.15% against the US Dollar (USD) and 0.05% against the Canadian Dollar, while showing the strongest performance against the Japanese Yen (JPY), up 0.39% [2]. The EUR/USD pair rose to around 1.1440, just above the nine-day EMA, but remained capped by the 50-day EMA, with technical indicators such as the 14-day RSI at 45 suggesting limited bullish momentum. A break below 1.1425 could target the 13-month low of 1.1322, while resistance lies at the three-week high of 1.1472 and the 50-day EMA at 1.1521 [2].
The US Dollar Index (DXY) touched a daily low near 100.80 after an intraday uptick to 101.22, stalling its recovery from last week's lows. Technical analysis shows the DXY struggling to hold above the 100-period SMA and flirting with the 23.6% Fibonacci retracement of the May-June upswing. The RSI at 46.66 and a slightly positive MACD reading indicate subdued momentum, with further downside possible if the index breaks below 100.80, targeting the 38.2% retracement at 100.20 [3].
Meanwhile, the Euro surged 0.36% to near 185.25 against the Japanese Yen, as the Yen underperformed across the board despite expectations that Japan's inflation will remain above the Bank of Japan's (BoJ) 2% target. A Reuters report indicated the BoJ may revise its economic growth forecast higher, potentially supporting a more hawkish policy stance. The Euro's gains were also supported by expectations that the European Central Bank (ECB) will deliver another 25 basis point rate hike in September, according to MUFC analysts, amid rising energy prices and renewed US-Iran tensions impacting global inflation expectations [5].
In the USD/CHF pair, the US Dollar posted moderate gains but remained capped below 0.8100, with price action contained within the recent range. The market showed hesitancy as investors awaited US CPI data and Fed Chair Kevin Warsh's testimony to Congress, both seen as key for future monetary policy direction. The USD/CHF traded at 0.8077, with technicals indicating modest upward momentum but resistance at 0.8100 and further targets at 0.8134 and 0.8170 if broken [4].
Across all sources, the market remains focused on upcoming central bank decisions and inflation data, with geopolitical developments in the Middle East continuing to influence risk sentiment, energy prices, and currency moves.
CONCLUSION
The Euro outperformed most major currencies on Monday, buoyed by easing Middle East tensions and expectations of further ECB tightening. Market participants are closely watching upcoming central bank meetings and inflation data for further direction. Overall, sentiment remains cautiously optimistic for the Euro, while the US Dollar and Japanese Yen face headwinds from technical and policy uncertainties.