EUR/USD regains lost ground as fears about the Middle East conflict ease

• The Euro bounces up with market sentiment improving.
• Fears of escalation in the Middle East conflict have eased.
• EUR/USD maintains its bullish trend intact while above 1.1500.

The EUR/USD pair is trading with moderate advances on Monday, extending its recovery after Friday's reversal, following Israel's attack on Iran. The pair has returned to levels close to 1.1560 from Friday's lows at 1.1490 as the market gauges the impact of the Middle East conflict.

Israel and Iran have continued shelling each other over the weekend. Still, so far, the tensions have not spread throughout the region and Iran has not threatened to block the Strait of Hormuz, a strategic path for Oil traffic and whose closure could draw the US into the conflict.

The US Dollar (USD), which rallied on Friday, favoured by investors' rush for safety, is losing ground again., Tariff uncertainty and the lack of progress on deals between the US administration and its trading partners are resurfacing, weighing on the Greenback, with the clock ticking closer to the July 9 deadline.

Investors are also looking at the Federal Reserve (Fed), which will decide its monetary policy on Wednesday. Interest rates are unlikely to change, but the soft data seen recently might prompt the central bank to show a dovish shift in the tone of its statement, laying the ground for a rate cut in September.

If that is the case, we could see the US Dollar resuming its longer-term bearish trend in the second half of the week. 

Daily digest market movers: The US Dollar loses ground again as fears of a regional conflict ease

• The tensions between Israel and Iran extend for their fourth day, but investors are showing some relief at the fact that the conflict has not spread to other countries. Russia and Cyprus have offered themself to mediate in the conflict, and US President Donald Trump urged the countries to find a deal. Risk aversion is ebbing, and the US Dollar is retreating from Friday's highs.
  
• As fears about the Middle East war ease, the focus shifts back to the uncertain global trade scenario. A news report released this weekend suggests that the US-China deal might have left the issue of rare earths commerce unresolved, which increases speculation about the real scope and durability of the agreement. The US administration is failing to cut any significant deal with trading partners, except a modest one with the UK and an ambiguous one with China, and the July 9 deadline approaches. So far, this anxiety is harming the US Dollar the most.
  
• The economic calendar is light in the Eurozone and the US on Monday. The main focus this week will be the Fed's monetary policy decision, due on Wednesday. The main interest will be on Chairman Jerome Powell's press release to assess whether the weak macroeconomic data seen in recent weeks has prompted the central bank to consider a rate cut in the near term.
  
• Futures markets are pricing steady interest rates in June and July, and a 66% chance of an interest rate cut in September, according to data released by the CME Group's Fed Watch tool.
  
• Friday's data revealed that the Eurozone Industrial Production month-over-month contracted at a 2.4% pace in April, well beyond the 1.7% fall expected, in a sign that tariff uncertainty has started to bite into the region's economy. These figures increased negative pressure on the Euro (EUR).
  
• In the US, the University of Michigan Consumer Sentiment survey showed improvement, with the index reaching its best preliminary reading in the last four months, at 60.5. Preliminary 1-year Consumer Inflation Expectations, on the other hand, declined to 5.1% in June from 6.6% in May. 

Technical analysis: EUR/USD maintains its bullish trend intact while above 1.1495

EUR/USD was rejected at levels above 1.1600 and corrected lower on Friday. Downside attempts, however, have been contained above a previous resistance area, at the 1.1500 area, which keeps the broader bullish structure intact.

The pair is now trading higher, with the 4-hour chart RSI moving well above the 50 level, indicating positive momentum. Immediate resistance is at 1.1575 intraday level, ahead of Friday's highs in the 1.1615-1.1630 area.

On the downside, the support area is at the June 5 high, at 1.1495, and the 1.1500 psychological level is keeping bulls in control. Below here, the next support is at the 1.1460 area, where the pair was capped on June 2 and 10. Further decline beyond this level would put the bullish trend into question.