Euro Holds Near Three-Month High as Investors Await US Sanctions on Iran

The euro traded in a narrow range near recent highs against the dollar on Monday, with the current price at 1.16628. Although the exchange rate eased slightly from the previous trading day, it successfully held onto most of the gains recorded last week, maintaining an overall strong stance. Market participants are currently focused on the upcoming details of new US sanctions against Iran, with geopolitical uncertainty providing some safe-haven buying support for the dollar, thereby limiting the euro's further upside potential.

**Iran Sanctions and Safe-Haven Sentiment Support the Dollar**

US Treasury Secretary Bessent is expected to unveil the specific sanctions against Iran later on Monday, with investors focusing on whether the measures will further restrict Iranian oil exports, thereby tightening global energy supplies. Earlier, US President Trump had stated he would launch the "most destructive economic action" against Iran and threatened severe financial penalties on countries helping Tehran evade sanctions. Meanwhile, the ongoing standoff between the US and Iran over the Strait of Hormuz keeps the war-risk premium elevated, offering short-term support for the dollar as a safe-haven currency.

**Diverging Central Bank Policy Paths Limit Euro's Downside**

Despite geopolitical risks temporarily boosting the dollar, the euro's downside remains limited. Markets broadly expect the European Central Bank to continue its tightening cycle at its upcoming policy meeting in September, a hawkish stance that provides solid support for the euro. In contrast, although the Federal Reserve's July meeting minutes indicated officials lean toward raising rates as soon as more progress on inflation is made, recent US Treasury intervention in the bond market—expanding purchases of longer-dated government bonds—has led to lower Treasury yields, pushing the dollar to a three-month low earlier. The potential divergence in the policy paths of the two central banks makes the euro show greater resilience against the dollar during pullbacks.

**Technical Outlook and Key Points Ahead**

From a technical perspective, the euro has already successfully broken above the 200-day simple moving average and key Fibonacci retracement levels, which the market views as a critical signal for bullish momentum. In the near term, investors will closely monitor upcoming US economic data and the specific implementation of Iran sanctions, as these factors could provide new directional guidance for the exchange rate.