EUR/USD Breaks 1.1400 Support as US-Iran Deal Hopes Collapse

EUR/USD broke below the key 1.1400 support zone, opening the door to new lows as fading US-Iran de-escalation hopes and strong US economic data revived dollar demand. The pair's slide followed a rejected Iranian proposal to reopen the Strait of Hormuz within seven days and hawkish repricing of Federal Reserve rate expectations that lifted October hike odds to 65%, according to the report published on 28 September 2026.

Context — Why the 1.1400 Break Matters Now

The euro had held above the 1.1400 handle through a stretch of dollar weakness that began when oil prices fell sharply on expectations of an earlier end to the Middle East conflict. Those expectations built into the UN General Assembly, where hopes ran high for a near-term resolution between Washington and Tehran.

That optimism reversed after the assembly. President Trump said the US would make a deal with Iran only after the November elections, remarks that undercut near-term resolution hopes and contributed to a renewed rise in oil prices.

The reversal mattered because it fed directly into the ECB's inflation calculus. The central bank had already flagged concern that a Middle East-driven energy shock could keep price pressures elevated for longer, raising headline inflation to 3.0% in 2026 and 2.5% in 2027, with both the 2027 and 2028 forecasts revised higher.

The ECB delivered a 25 basis point hike at its last meeting, taking the deposit rate to 2.50% as widely expected. The stronger growth assessment that accompanied the decision — with 2026 and 2027 growth forecasts upgraded — gave policymakers more room to keep tightening despite the inflation shock.

ECB sources indicated policymakers are already discussing another hike as early as the October meeting if energy prices remain elevated and inflation risks broaden. Lagarde did not pre-commit to October, stressing a data-dependent, meeting-by-meeting approach.

Data — What the Numbers Show

The 1.1400 break is the central fact. That level had acted as key support on the daily chart, and losing it opened the door for a move into new lows.

On the rate side, US Flash PMIs came in very strong on Wednesday, triggering another hawkish repricing in interest rate expectations. Treasury yields reached new highs and the odds for a rate hike in October climbed to 65%.

Eurozone Flash PMIs released last week showed a resilient economy, giving the ECB room to tighten further if needed. Friday's Eurozone Flash CPI could decide whether the central bank hikes again in October; at the moment there is roughly a 38% chance of a rate hike.

Before/after on the headline level: the euro traded above 1.1400 into the UN General Assembly, then broke below it after Trump rejected Iran's Strait of Hormuz proposal on Saturday and told reporters he expected to resume bombing Iran after the midterms.

The dollar started the week on a good note as risk-off sentiment dominated the Asian session, with crude oil and Treasury yields erasing some of Friday's losses.

Analysis — What It Means for Markets and Positioning

The euro is caught between two opposing forces. A Middle East breakthrough would be negative for the US dollar in the short term, since aggressive rate hike bets would likely get pared back. A prolonged stalemate or re-escalation supports the greenback into new highs.

That asymmetry explains why sellers keep stepping in around the broken support with defined risk above it, targeting the 1.1100 handle. Buyers need the price to rise back above the broken support to position for a correction toward the downward trendline around 1.1550.

On the 4-hour chart, a downward trendline has defined the bearish momentum. Sellers lean on the trendline with defined risk above it to push into new lows; buyers want a break above both the trendline and the broken support to open a correction toward the trendline, with the 1.15 handle as the first target.

On the 1-hour chart, the price broke below an upward counter-trendline, which generally signals new lows to come. Sellers pile in with risk above the downward trendline; buyers wait for a rise above it.

The counter-argument for dollar bulls: if the Middle East situation resolves quickly, the energy shock that the ECB cites as an inflation risk would fade, cutting both the ECB's case to tighten and the Fed's urgency to hike into elevated oil-driven prices. The 38% October ECB hike probability and the 65% US October hike probability would reprice together, and the euro's rate differential would narrow.

Outlook — What to Watch Next

The calendar is dense. The US Consumer Confidence report and US Job Openings data arrive tomorrow, followed by US ADP and the US PCE price index on Wednesday. Thursday brings the US ISM Manufacturing PMI and the latest US Jobless Claims figures. Friday concludes with Eurozone Flash CPI and the US NFP report.

Eurozone Flash CPI is the pivotal print for whether the ECB hikes again in October. A hot reading lifts the 38% probability; a soft one weakens the case.

On the charts, 1.1400 is the pivot. A sustained move back above the broken support and the 4-hour downward trendline opens a correction toward 1.1550. Holding below keeps the 1.1100 handle in play. The red lines define the average daily range for today.

Frequently Asked Questions

What does the 1.1400 break mean for EUR/USD traders?

The 1.1400 handle had acted as key support on the daily chart. Breaking below it signals the bearish momentum is extending and opens the door for a move into new lows. Sellers now have a defined-risk setup with stops above the broken support, targeting the 1.1100 handle, while buyers need a reclaim of 1.1400 to build a correction case.

Why did the US dollar strengthen despite Middle East risk?

Higher oil prices from the stalled Iran talks feed directly into inflation risk, which supports the case for Fed tightening. Strong US Flash PMIs then triggered a hawkish repricing in rate expectations, pushing Treasury yields to new highs and October hike odds to 65%. Risk-off sentiment in the Asian session added to dollar demand as oil and yields erased Friday's losses.

What would a US-Iran deal do to EUR/USD?

A breakthrough would be negative for the US dollar in the short term. Oil prices would fall, aggressive rate hike bets would likely get pared back, and Treasury yields would ease. That combination typically weakens the greenback and would give EUR/USD room to recover above the broken 1.1400 support toward the 1.1550 trendline resistance.

Bottom Line

EUR/USD's break below 1.1400 hangs on Middle East escalation and Friday's Eurozone Flash CPI, which together decide the October ECB hike odds.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.