EUR/USD Retreats from Gains as Risk Aversion Dominates Markets

EUR/USD pared earlier gains Friday, pulling back from intraday highs as escalating Middle East tensions triggered broad risk aversion following Israeli strikes on Iranian nuclear facilities. The pair, which had been trending higher on diverging central bank policies, faced selling pressure as traders sought dollar safety. Despite the euro's recent uptrend supported by hawkish ECB positioning versus dovish Fed expectations, geopolitical uncertainty overwhelmed fundamental drivers. The pair found support near the 1.0750 level but struggled to maintain momentum above 1.0800 psychological resistance. Technical indicators turned neutral from bullish as volatility spiked, with the 50-day moving average at 1.0780 now acting as immediate resistance. Market participants are reassessing positions ahead of next week's ECB meeting, where officials may address both inflation concerns and geopolitical risks. The sudden shift in sentiment highlights how quickly geopolitical events can override established technical and fundamental trends.