EUR/USD – Flag breakdown supports more downside towards 1.1325

• EUR/USD trades lower at around 1.1390 as the US Dollar strengthens.
• Increased aggression between the US and Iran has improved the US Dollar’s safe-haven demand.
• Investors await Fed Chair Warsh’s testimony and the US CPI data.

The Euro (EUR) holds opening losses at around 1.1390 against the US Dollar (USD) during the mid-Asian trading session on Monday. The major currency pair faces selling pressure as the US Dollar starts the week on a strong note due to an increase in the appeal of safe-haven assets.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.2% higher to near 101.15.

Escalating military actions between the United States (US) and Iran over Tehran showing dominance over the Strait of Hormuz, a critical chokepoint to almost 20% of global energy supply, have forced investors to shift to the safe-haven fleet and have de-anchored inflation expectations.

To get cues regarding the current status of US inflation, investors will pay close attention to the Consumer Price Index (CPI) data for June, which will be released on Tuesday.

This week, investors will also focus on Federal Reserve (Fed) Chair Kevin Warsh’s two-day testimony before Congress starting on Tuesday.

Technical Analysis:

EUR/USD trades lower at around 1.1390, keeping a bearish near-term tone as spot holds beneath the 20-period Exponential Moving Average (EMA) at 1.1443 and a breakdown of the Bearish Flag formation.

The Relative Strength Index (14) hovers near 38, hinting at persistent but not extreme downside momentum.

On the topside, initial resistance is aligned with the lower boundary of the parallel channel near 1.1424, followed by the 20-period EMA at 1.1443, with the channel top around 1.1530 acting as a stronger cap if a rebound extends. On the downside, major support levels are the June 24 low at 1.1324, followed by 1.1300.

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