On Tuesday, the euro is strengthening against the U.S. dollar as the American currency loses ground amid cautious market sentiment ahead of the deadline set by U.S. President Donald Trump for reaching an agreement with Iran or opening the Strait of Hormuz. At the time of writing, the EUR/USD exchange rate holds around 1.1577, continuing to rise for the second consecutive day.

The U.S. Dollar Index (DXY), which tracks the dollar's performance against a basket of six major currencies, has fallen to 99.80, failing to settle above the key 100 threshold.

Earlier, Trump stated that the U.S. was prepared to destroy Iran's energy and civilian infrastructure if an agreement is not reached by 8:00 PM EST (00:00 GMT on Wednesday). As the deadline approaches, the Iranian state media, Tehran Times, reported that Tehran has suspended all diplomatic and indirect contacts with Washington. In a new post on Truth Social, the American president warned: "Tonight, an entire civilization may perish, one that cannot be restored. I don't want that, but it is likely to happen."

Amid already high oil prices, any further escalation of the conflict could exacerbate macroeconomic consequences. The rising cost of energy increases inflationary pressure and threatens to slow economic growth—especially in the Eurozone, which remains a net energy importer.

In contrast, the U.S., as a net energy exporter, is in a relatively more resilient position, allowing it to partially offset the energy shock.

Preliminary data for March from the Eurozone indicate an acceleration in inflation: the harmonized consumer price index (HICP) rose by 1.2% compared to 0.6% the previous month, while the annual figure increased to 2.5% from 1.9%. Market attention is now focused on the upcoming U.S. inflation data release, expected at the end of the week. The consensus forecast calls for a 0.9% increase in the consumer price index (CPI) in March, following a 0.3% rise in February, which would elevate annual inflation to 3.3% from 2.4%.

In this context, investors generally expect the Federal Reserve to keep interest rates unchanged, while the European Central Bank retains the possibility of two rate hikes by the end of the year in its pricing models.Recent statements from monetary authorities have taken a cautious tone: New York Fed President John Williams noted that current monetary policy has grounds for a wait-and-see approach, adding that geopolitical tensions might add "a tenth or two" to the baseline inflation rate. Meanwhile, according to The Wall Street Journal, ECB board member Pierre Wunsch acknowledged the possibility of consecutive interest rate hikes should the Iranian crisis continue to drag on.

From a technical perspective, the pair has confidently surged past the 20-day SMA at around 1.1550 and is heading towards the round level of 1.1600. Once this level is surpassed, the next obstacle will be the 50-day EMA, followed by the critically important 200-day SMA.

However, if the pair fails to hold above the 20-day SMA, it will find support at 1.1515, ahead of the round number at 1.1500. Failing to hold above that, prices could accelerate the decline towards 1.1450.Oscillators are negative, and bulls currently lack significant strength.