EUR/USD: the FED is heading towards status quo tomorrow...and in July!

The Eurozone, heavily reliant on external sources for its fossil fuel energy consumption, has been relieved by the confirmation of a memorandum of understanding, which should lead to the signing of a peace agreement between Tehran and Washington. This is despite the fact that many points still need to be finalized, notably the "service fees" that Iran could impose on commercial vessels transiting the Strait of Hormuz.

The euro gained a few more pips this morning against a dollar that, for its part, was falling due to the sharp decline in crude oil prices, on the eve of the conclusion of the Fed's latest monetary policy meeting.

"According to statements relayed by media outlets close to the Iranian regime, the agreement provides for a gradual lifting of US sanctions on Iranian oil exports, the release of approximately $11 billion in assets held abroad, as well as a commitment to reopen the Strait of Hormuz within 30 days (after demining) and the lifting of the US naval blockade," notes Deutsche Bank.

"The agreement also provides for a 60-day negotiation period for a broader agreement, including restrictions on Iran's nuclear program, under which Tehran would commit to maintaining its current status and not seeking to acquire nuclear weapons," the German bank continues.

Everything will not return to normal overnight, and global logistics flows have their own degree of resilience, which is not always to the liking of the business world. But it's clear that a sense of relief prevails, a positive sign for the single currency, a barometer of risk appetite in financial markets.

"Reports of an agreement between the United States and Iran to extend the ceasefire, reopen the Strait of Hormuz, and begin negotiations for a lasting peace agreement are clearly positive for the global economy and financial markets. The main driver of the conflict has been energy: the disruption of approximately 19 million barrels per day of oil flows through the Strait of Hormuz has driven up energy prices, revived fears of stagflation, and contributed to the ECB's 25 basis point rate hike last week," summarises Thomas Hempell, Head of Macroeconomic Research at Generali Investments.

It is in this context that the Fed concludes its Monetary Policy Committee meeting tomorrow, Wednesday. A status quo on the dollar's exchange rate is widely shared, and the probability of a 25 basis point rate hike at the end of next month has plummeted to less than 5% in light of recent geopolitical events.

On the economic front, the ZEW index of confidence in the German economy jumped from -10.1 to +10.4, soundly beating consensus expectations. "The ZEW indicator has returned to positive territory, as financial market experts anticipate an imminent end to the Iranian conflict. This should ease the strong pressure on energy prices and inflation, which would benefit energy-intensive industries and households, and stimulate domestic demand," comments Professor Achim Wambach, PhD, Chairman of the ZEW, regarding the results of the current survey, which was conducted before the latest developments in the Middle East conflict.

Right now, the EUR/USD is trading at $1.1615.

KEY TECHNICAL ELEMENTS
The euro has just completed its pullback (rejection) from a resistance zone at $1.1610, a level that corresponds to the 20-day moving average (dark blue line).

MEDIUM-TERM FORECAST
Based on the key technical factors mentioned above, our medium-term outlook for the EUR/USD is neutral.

We will maintain this neutral outlook as long as the EUR/USD remains between the support level at $1.1460 and the resistance level at $1.1608.