The US President announced over the weekend that a peace agreement between the United States and Iran has been "substantially agreed." As a result, EUR/USD opened with a gap higher on Monday, rising as much as 0.43% to 1.1648, reversing the declines of the previous two trading sessions. It was last up 0.34% at 1.1637. Hopes that a US-Iran deal would lead to the reopening of the Strait of Hormuz caused oil prices to tumble sharply, at one point falling over 6% to breach the $100 level and touch $97.66 per barrel. This partially alleviated inflation concerns and interest rate hike pressures, while also reducing safe-haven demand for the US dollar.

The US President detailed the progress on the US-Iran agreement, stating that the strait will reopen and follow-up negotiations on nuclear issues will proceed. He indicated on Saturday that the "final aspects and details" of a memorandum of understanding were still under discussion but added that the Strait of Hormuz would be reopened as part of the deal. He wrote on social media, "The deal is substantially agreed, pending finalization by the US, Iran, and other countries." This announcement followed intensive diplomatic efforts involving Pakistan, Gulf states, and Israel. It was reported that Iran and Pakistan submitted a revised proposal to Washington aimed at ending the conflict and restoring shipping passage through the Strait of Hormuz. The broader framework reportedly includes a formal declaration to end the conflict, to be followed by negotiations on Iran's nuclear program within the next two months.

The outlook for EUR/USD suggests the currency pair rebounded due to improved risk sentiment. Easing geopolitical tensions typically weaken the safe-haven appeal of the US dollar, while falling oil prices help support the currencies of energy-importing nations and broader market confidence. With crude oil's significant decline, investors may be rotating back into EU equities and higher-beta currencies, reducing defensive US dollar positions. This has pushed EUR/USD higher at the start of the week, especially if liquidity conditions during the Asian session exaggerated the initial move. Additionally, a secondary macroeconomic effect is at play: lower energy prices will help ease global inflationary pressures, potentially reigniting expectations for the Federal Reserve to cut interest rates in the coming months.

Despite the optimistic market mood, traders still face limited information. Iranian officials continue to publicly insist that control of the Strait of Hormuz will remain in Tehran's hands, while Iranian state media described the US President's claim that a deal is close as "inconsistent with the facts." Issues such as uranium enrichment, sanctions relief, frozen Iranian assets, and the future structure of any nuclear talks remain unresolved. Reports indicate that Tehran is demanding the release of billions of dollars in frozen assets, compensation for damages, and an end to the US blockade of Iranian ports before fully committing to a broader resolution.

For now, the market appears willing to focus on the immediate positive developments. After weeks of escalating geopolitical tensions and fears of a broader regional conflict, investors finally see a credible signal pointing towards de-escalation.

A daily technical analysis of EUR/USD shows the pair currently trading around 1.1635, consolidating after a recent rebound from lows, with several technical indicators showing neutral to weak signals. In terms of the moving average system, the short-term MA5 (1.1616) is essentially flat with the current price, while the MA10 (1.1647) is slightly above the spot price. The MA20 (1.1686), MA50 (1.1656), MA100 (1.1698), and MA200 (1.1680) are all positioned above the current price, forming short-term resistance. This configuration, where "price is below all major moving averages," indicates that EUR/USD is clearly under short-term pressure and is in a weak consolidation pattern.

In summary, news of the US-Iran deal being "substantially agreed" has provided a short-term boost to EUR/USD, with expectations of reduced geopolitical risk driving the euro higher. However, issues such as Iran's insistence on control of the strait and frozen assets remain unresolved, leaving uncertainty about whether the deal will ultimately be finalized. In the near term, the movement of EUR/USD will depend on substantive progress in US-Iran negotiations and shifts in market expectations regarding Federal Reserve policy.