09.04.202600:35 Forex-elemzések és áttekintések: EUR/USD: When the Guns Fall Silent, Interest Rates Will Speak

Geopolitical and political fundamental factors typically do not "last long" without informational support. Take, for example, the recent events in Venezuela. Actions taken by the United States in Venezuela triggered a surge in anti-risk sentiment, allowing the safe-haven dollar to strengthen. However, the "Venezuelan track" was quickly forgotten when Maduro ended up in an American prison, and power in the country shifted to politicians who were forced to cooperate with the U.S.

We can recall other geopolitical episodes that briefly triggered spikes in market volatility. For instance, in November of last year, Japanese Prime Minister Fumio Kishida stated that Japan "could carry out military intervention if China attempts to seize Taiwan." At that time, Japan's relations with China significantly deteriorated, and demand for safe-haven assets in the currency market increased. However, this geopolitical factor (thankfully) was no longer supported, allowing traders to turn the page on that chapter.

The "Iran case" in this context is more resilient and will likely remain in focus for a longer period. However, if the parties truly sit down at the negotiating table and move toward a deal, the geopolitical agenda will gradually diminish. This is especially true in the case of Iran unblocking the Strait of Hormuz and resuming shipping in the region. In that scenario, macroeconomic reports and the prospects for divergence in monetary policy between the European Central Bank and the Federal Reserve will come to the forefront. While the dollar feels secure in the "geopolitical kitchen," its positions appear less clear-cut when macroeconomic factors are considered.

According to several experts (notably analysts from Commerzbank), the ECB is unlikely to rush into raising interest rates in April if the two-week truce is maintained in some form—either through an agreement or by prolonging the negotiation process. Formally, this is a signal against the euro (and buyers of EUR/USD). However, it's important to remember that under the same conditions, the Fed will likely start signaling a willingness to lower interest rates. Recent macroeconomic reports (NFP, ISM Services) have contributed to the Fed's easing rhetoric.

In particular, according to the latest Non-Farm Payroll data, average hourly wages in March increased by only 0.2% month over month, while the year-over-year figure slowed to 3.5% (a multi-year low). For the Fed, this is a signal that inflationary pressure from the labor market is weakening. Moreover, the labor market continues to cool down, despite the "explosive" employment growth in March, which was primarily driven by the healthcare sector as employees returned after February's strikes. It is clear that this is a one-time factor, not a sustainable trend. Additionally, many other components of the March Non-Farms raised concerns—such as the labor force participation rate decreasing to 61.9% and the U-6 unemployment rate rising to 8.0% (from 7.9%). Furthermore, the average workweek duration decreased to 34.2 hours.

The ISM Services Index, released on Monday, only added to the negative picture, despite the "headline" figure remaining in the expansion zone. Meanwhile, the employment sub index fell to 45.2, indicating that employers are actively cutting their workforce. The services sector is crucial to the U.S. economy, so these trends point to the risk of a hard landing.

Attention should also be drawn to the Durable Goods Orders report published on Tuesday. The total volume of durable goods orders decreased by 1.4%, marking the lowest reading since October of last year. The aviation sector was the main anchor, with orders plummeting by nearly 30% (-28.6%). Although this is a volatile sector, such dynamics pull down the entire industrial GDP.

All of these macroeconomic signals are currently being largely ignored, as geopolitics remains at the forefront. However, if (or when) the guns in the Middle East do "fall silent," the market will turn the page on this chapter and see that the American economy is cooling down faster than Europe's. The outlook for Fed rate cuts will come back into focus amid the ECB's wait-and-see stance. It's worth noting that the updated dot plot from March still forecasts one rate cut this year, and in June, the Fed will be headed by Trump's protege, Kevin Warsh.

In other words, if military action in the Middle East does not resume, the EUR/USD pair is likely to maintain its upward momentum—even after the initial "euphoria" regarding the ceasefire subsides.

The key price barrier here is the 1.1720 resistance level (the lower boundary of the Kumo cloud on the daily chart). As we can see, buyers failed to overcome this resistance level impulsively, reacting to news of ceasefire violations. Therefore, there is no need to rush into long positions now: if the EUR/USD bulls do not overcome this target within the next few days, sellers will regain the initiative, and the pair will probably settle in the range of 1.1610–1.1690. Longs will only be relevant if buyers break through 1.1720 and consolidate above this level. In that case, the next target of the upward movement will be the 1.1800 mark, which corresponds to the upper line of the Kumo cloud on the daily chart.