Euro retreats as US-Iran tensions grow

• EUR/USD hits session lows near 1.1700, down from Friday's highs near 1.1785.
• Trump's vow to free ships in Hormuz has triggered a verbal escalation with Iran.
• Eurozone Manufacturing PMI confirms that business activity accelerated, despite war pressures, in April.

The Euro (EUR) is retreating further from last week's highs at the 1.1785 area against the US Dollar (USD) on Monday, and trades at session lows near 1.1710 at the time of writing. US President Donald Trump’s pledge to reopen Hormuz has triggered fears of a further escalation of the conflict, sending Oil prices higher and dampening investors’ appetite for risk.

Trump announced on early Monday a military operation to help free vessels stranded in the Strait of Hormuz as a “humanitarian act” towards neutral countries without giving any details on the plan. Iranian authorities answered that any military action would be considered a violation of the ceasefire, and responded with “full strength.”

The plan has failed to soothe investors, and Oil prices have rushed higher. The Brent Barrel trades near $108, and the WTI is a few cents below $100. 

In the Eurozone, data released on Monday has fallen on the bright side, but the impact on the pair has been marginal so far. The final HCOB Manufacturing Purchasing Managers’ Index (PMI) has confirmed preliminary figures of a  52.2 reading in April, a 47-month high and up from 51.6 in March, and the Sentix Investors' Confidence Index improved moderately to -16.4 in May from -19.2 in April.

Later on Monday, the speeches by European Central Bank (ECB) committee members, Piero Cipollone and Joachim Nagel, are likely to draw some attention. In the US, the focus will be on March Factory Orders, although the highlights of the week will be April’s employment reports, with particular interest in Friday's Nonfarm Payrolls reading.

Technical Analysis: Looking for direction around 1.1700

EUR/USD found support above the 1.1650 area and is looking for direction halfway through a broadly 100-pip range, with upside attempts capped below the 1.1785 area.

Technical indicators on the 4-hour chart are still in bullish territory, yet momentum is fading. The Relative Strength Index (RSI) is around 50, pointing to a balanced bias, while the Moving Average Convergence Divergence (MACD) indicator hovers close to the zero line with only modest positive histogram readings, hinting at a lack of clear directional conviction for now.

The pair is now clinging to support above the 1.1700 level on Monday, which so far is closing the path towards the mentioned support area between 1.1645 and 1.1675. On the topside, immediate resistance lies at the 1.1785 area, which capped bulls last Friday and on April 20 and 21. Further up, the April 17 high at 1.1850 and the February 10 high, near 1.1930, would come to the focus ahead of the 1.2000 psychological level.

(The technical analysis of this story was written with the help of an AI tool.)