Last week, major central banks all signaled a hawkish stance, especially the synchronized shift by the European Central Bank and the Bank of England, which gave me new thoughts on the euro exchange rate trend. The euro/dollar rose by 1.34%, and the British pound also increased by 0.89%, indicating that non-dollar currencies are rebounding.

However, how far this rebound can go still depends on the Middle East situation. The escalation of the US-Iran conflict directly pushed up oil prices, putting significant pressure on energy-importing countries like Japan and Europe. Although the hawkish signals from the Federal Reserve Chair previously supported the dollar, the dollar index actually fell by 0.99% amid the hawkish stance from the ECB and BoE. The market no longer expects the Fed to cut rates this year, but instead bets on the possibility of rate hikes in 2026.

From a technical perspective, EUR/USD is still below the 21-day moving average, and the bearish momentum remains relatively strong, with support at 1.139. If it breaks above resistance, the next target is the 100-day moving average at 1.168. As for the yen, USD/JPY didn't rise much last week, but the outlook for the Bank of Japan raising interest rates remains uncertain, as high oil prices are heavily weighing on the Japanese economy.

This week, the key will still be how the Middle East situation develops and whether oil prices can stabilize. If the US-Iran conflict continues to escalate, the dollar may strengthen again, which would suggest a downward trend for the euro exchange rate; conversely, if tensions ease, the euro might have the chance to continue rebounding.