The euro fell initially on Monday but bounced after Trump send out a message that the US and Iran were talking. However, the Iranians deny this.
EUR/USD
From Daily Forex, this is Christopher Lewis looking at the euro against the US dollar. The euro did fall initially on Monday as the risk of escalation in the war continues to be a major problem. That being said, I think you have to look at this as a market that continues to see a lot of noise, but I also recognize that there are a lot of different things moving at the same time.
Geopolitical and Interest Rate Pressures
This is probably a scenario where the markets are just kind of hanging around the 200-day EMA because they don't really know what to do. With this, I believe you have a market that will move on interest rates, which of course dropped after the announcement that the Americans and the Iranians have been talking.
If that remains the case, it probably ends up being a scenario where the dollar cools off a bit because yields have dropped. The ECB was a little more hawkish than anticipated, but we will just have to wait and see how that really plays out. This is a market that given enough time I think has to make a bigger decision.
I do believe that the inflation story in the United States is probably the bigger of the two, so I still think of this as a market that you will be looking to sell, but I also recognize that the markets continue to be a fluid situation because this was all based on a couple of social media posts.
The market is just as likely to take off to the upside as it is the downside and therefore it becomes a very difficult place to live. I think short-term volatility will only increase and with that you have to be very cognizant of your position size. I still feel like the market has more overhang than upside at the moment and we are starting to pull back a little bit from the highs already.