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The euro remains firm against the U.S. dollar amid persistent tensions in the Middle East, as the United States carries out a second consecutive day of strikes against Iran near the Strait of Hormuz.
At the time of writing, the EUR/USD pair is trading around 1.1430.
The U.S. Central Command stated that the additional strikes against Iran are intended to further weaken its ability to threaten freedom of navigation through the strategically important Strait of Hormuz.
The market responded quickly to the news with a decline in risk appetite, reflected in weaker U.S. stock indices on Wednesday. At the same time, oil prices moved higher.
Earlier, the Federal Reserve released the minutes of its latest meeting, showing that all members voted unanimously to leave interest rates unchanged while noting the continued resilience of the labor market. In addition, most participants supported abandoning the previously more dovish language and agreed on a more hawkish wording for the accompanying monetary policy statement.
According to money market pricing, the probability of a 50-basis-point rate hike in September is estimated at 18%, while the likelihood of a 25-basis-point increase stands at approximately 52%.
The U.S. Dollar Index (DXY), which measures the dollar's performance against a basket of six major currencies, also strengthened.
In Europe, the macroeconomic calendar remained relatively quiet, although European Central Bank officials were active in commenting on the situation. Joachim Nagel of the Bundesbank noted that following Iran's attacks, "we are back where we were before," emphasizing the need for a gradual, meeting-by-meeting approach to the ECB's monetary policy decisions.
Meanwhile, Primoz Dolenc of the European Central Bank (ECB) expressed concern about what policy steps the central bank may take in two weeks.
On Thursday, investors should monitor U.S. Initial Jobless Claims, while in Europe the focus will be on Germany's trade balance, as well as inflation data from Germany and France.
From a technical perspective, the pair is attempting to break above the 20-day Simple Moving Average (SMA). At the same time, momentum oscillators remain in negative territory, indicating that bears still hold the advantage. For bulls to improve the technical outlook, they need to secure a break above the 20-day SMA. This would open the way toward stronger resistance levels.
On the 4-hour chart, however, bulls have gained a foothold after breaking above the 100-period SMA. If they manage to consolidate above this moving average, they will challenge the key 200-period EMA and 200-period SMA. Meanwhile, the oscillators have moved into positive territory, providing additional support for the bullish scenario.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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