No matter how encouraging the headlines may sound, optimism surrounding US–Iran talks should be treated with caution. Rumors of negotiations have boosted risk appetite and pushed the US dollar lower. Yet, the credibility of these reports remains highly questionable. Let’s discuss this topic and make a trading plan for the EUR/USD pair.
The article covers the following subjects:
Major Takeaways
- The US administration speaks of negotiations with Iran.
- The ceasefire has caused the US dollar to slide.
- Donald Trump is focused on peace.
- Short positions can be opened as long as the EUR/USD pair is trading below 1.16.
Weekly US Dollar Fundamental Forecast
Does anyone truly believe him, or is there really no smoke without fire? These questions emerged after Donald Trump claimed that negotiations between the United States and Iran were underway—allegedly aimed at reopening the Strait of Hormuz under some form of joint control, along with a temporary five-day halt to strikes on Tehran’s energy infrastructure. Against this backdrop, oil prices dropped below $100 per barrel, while EUR/USD quotes surged above 1.16 in the short term.
In the aftermath of the earlier 48-hour ultimatum to Iran, investors had been bracing for the worst: a prolonged and escalating conflict. Now, however, concerns are shifting toward stagflation. The longer the Strait of Hormuz remains blocked, the greater the risk of a global slowdown tipping into recession. Goldman Sachs has already raised the probability of a US recession over the next 12 months from 25% to 30%, forecasting GDP growth to slow to 1.25–1.75% in the second half of the year.
Trump’s remarks triggered a sharp rebound in risk appetite. Equities rallied, Treasury yields declined, and the US dollar weakened significantly—delivering exactly the financial conditions the White House had hoped for. In that sense, the “Trump put”—investor belief that President Trump’s policies would protect against market downturns—worked. The key question now is whether the US leader has mistaken wishful thinking for reality.
US Dollar’s Reaction to Trump’s Remarks
Source: Bloomberg.
Iran insists that no negotiations with the United States are currently underway. While several Middle Eastern countries have expressed interest in initiating dialogue, Tehran maintains that it did not start the conflict and that such efforts are directed at the wrong party. In this context, statements by Donald Trump appear to be little more than diplomatic signaling aimed at easing pressure on oil prices. However, it is Iran—not the United States—that effectively controls the Strait of Hormuz, meaning rhetoric alone is unlikely to reverse the upward trend in Brent crude.
Trump’s motivations may have extended beyond mere oil prices. Notably, Treasury yields were surging, the US dollar was strengthening rapidly, and equity markets had entered a correction phase. These factors may have forced the US administration to shift its tone. The proposed de-escalation—halting strikes in exchange for mutual restraint and a return to negotiations—can be seen as an attempt to stabilize markets. However, Tehran has previously expressed its desire for compensation for the damage to its infrastructure, raising doubts about whether any meaningful agreement can be reached.
One conclusion stands out: oil prices are likely to remain elevated, while the US dollar will continue to serve as a hedge against escalating geopolitical risks. In this environment, the USD index is unlikely to experience a sustained decline. On the contrary, if recent developments prove to be driven more by rhetoric than reality, the greenback may resume its upward trajectory.
Weekly EURUSD Trading Plan
What lies ahead for EUR/USD quotes? The answer hinges on geopolitical factors. If Iran confirms negotiations with the United States and a five-day truce takes hold, the euro could gain ground against the greenback. However, if the conflict continues and Tehran denies any talks, the EUR/USD could slide back to 1.1540. If the price fails to settle above 1.16, selling pressure will likely intensify, creating an opportunity to open short positions.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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