The euro held gains against the dollar near 1.1640–1.1650 on Monday, supported by a softer greenback after the United States and Iran signaled progress toward a deal to reopen the Strait of Hormuz, while thin Memorial Day trading kept price action subdued.
With U.S. cash markets shuttered for the holiday, currency volumes were well below normal. EUR/USD gathered strength to around 1.1640 during the early Asian session, with the euro edging higher as US-Iran peace deal hopes improved risk sentiment.
The pair briefly touched 1.1650 before pulling back as the morning session wore on in Europe.
How Iran Deal Progress Shifted the Dollar Lower
The catalyst was a flurry of weekend statements from Washington and Tehran. President Donald Trump posted on social media that an agreement had been “largely negotiated, subject to finalization,” and that Iran’s foreign ministry described the deal as including a memorandum of understanding as a first phase, with broader talks expected within 30 to 60 days.
Iran committed in principle to reopen the Strait of Hormuz and dispose of its stockpile of highly enriched uranium as part of the deal, though the specific method of disposal and the length of a moratorium on future uranium enrichment remain under negotiation.
Sanctions relief and the unfreezing of Iranian assets would follow only if the Strait reopens and Iran follows through on commitments to negotiate curbs on its nuclear program.
Global stocks rose to record highs while crude oil fell as officials signaled the US was nearing a deal that would restore oil flows through the Strait.
The dollar retreated against all of its Group-of-10 peers. Trump later tempered expectations, saying he was not in a rush to finalize anything and believed time was on his side.
Why Gains Stalled Before the Close
The rally in EUR/USD did not hold cleanly. The pair retraced from 1.1650 in European trading, reversing gains as optimism over the potential US-Iran peace deal appeared to fade.
Markets turned cautious, reviving safe-haven demand for the dollar.
That intraday reversal underlined how sensitive currency moves remain to headline risk from the Middle East.
Minutes from the latest FOMC meeting showed that most policymakers believe additional interest rate hikes could still be appropriate if inflation remains persistently above the Federal Reserve’s 2% target, though markets broadly expect rates to stay unchanged through the remainder of the year. That backdrop limits how far the dollar can fall even when risk appetite improves.
What the Charts Show Between 1.1635 and 1.1680
Technical signals offered a cautiously constructive picture for the euro at current levels.
EUR/USD held above the 23.6% Fibonacci retracement of the April-May downfall, with the RSI around 58 and a slightly positive MACD reading hinting at improving momentum.
The next meaningful resistance sits near the 38.2% Fibonacci level, around 1.1675 to 1.1680.
The pair peaked at 1.1974 on January 28, 2026, pulled back to 1.1476 on March 13, then recovered along a supportive trendline to the 1.17 area by late April.
The 1.1635 level, broken as resistance on April 8, now acts as the first meaningful downside target.
What Traders Watch From Here
The next steps hinge almost entirely on whether a formal US-Iran agreement materializes. The deal is expected to unfold in two phases, with the first focused on reopening the Strait.
Any signed agreement or official breakdown in talks would likely generate the largest single-session move in EUR/USD since the conflict began.
On the data front, U.S. markets reopen Tuesday, May 26, 2026, restoring full liquidity.
No major U.S. economic releases are scheduled that day, leaving geopolitical developments as the primary market driver into the back half of the week.
