Sellers of EUR/USD were testing the 16-figure mark on Monday amid a grim, troubling fundamental backdrop. Alongside the ongoing influence of the Middle Eastern conflict, additional pressure on the pair comes from the escalation of trade tensions between the US and the EU, following Donald Trump's recent threats to raise tariffs on the European automotive industry. A renewed wave of risk aversion is favoring the safe-haven dollar, which is in higher demand across markets. It seems this trend will persist—at least in the near term. If Trump does not once again surprise the markets with a "TACO strategy," the EUR/USD pair will remain under significant pressure.

Let's start with the "Iran case." Unfortunately, the situation here is still far from de-escalation. The US and Iran maintain contacts through Pakistani intermediaries, but have yet to reach any agreement. On the negotiating table are two "competing" proposals that effectively reflect mutually exclusive positions: Iran's conditions are unacceptable to the United States, while the American demands, in turn, do not satisfy Tehran. Washington insists on the immediate opening of the Strait of Hormuz, guarantees for the safety of navigation, and long-term restrictions on Iran's nuclear program—up to a complete ban on enrichment. Meanwhile, the Iranian side insists on the lifting of all sanctions, the cessation of the US naval blockade, and the withdrawal of American troops from the region. According to Iranian representatives, the current negotiations should focus exclusively on the conditions for ending the war, not the "nuclear dossier."

Trump has already labeled Iran's new negotiation plan as "unacceptable." Simultaneously, he stated that American representatives are having "very positive" negotiations with Tehran.

Additionally, according to the US president, American forces will begin escorting civilian vessels stuck in the Strait of Hormuz this week. Iran has already criticized this statement. In particular, the chairman of the Iranian parliamentary committee on national security stated that US intervention in shipping in the region "will be regarded as a violation of the ceasefire." He noted that any attempts to influence the new order in the Strait "will provoke a response."

In other words, the situation remains extremely tense and contradictory. On the one hand, negotiators, through intermediaries, are exchanging proposals, demonstrating formal readiness for dialogue and a desire to keep the negotiation process actively engaged. On the other hand, the countries continue to exchange tough, belligerent rhetoric, signaling a lack of real progress in the negotiation process. In particular, representatives of the IRGC have warned of their readiness to resume full-scale hostilities in the event of a complete breakdown of diplomatic efforts. The United States, for its part, also shows readiness to return to a military scenario, maintaining a significant naval presence near Iran's borders.

Thus, the Middle Eastern factor continues to fuel demand for safe-haven assets—including the dollar.

An additional source of risk is the escalating trade tension between the US and the EU. Let me remind you that on May 1, Donald Trump announced that the United States would increase tariffs on passenger and cargo vehicles from the EU from 15% to 25%. The White House accused the European Union of failing to adhere to the terms of a trade deal reached in Scotland in July of last year. According to the American side, Brussels is deliberately stalling the ratification process of the reached agreement. It is essential to note that the EU has not yet lifted tariffs on imported American industrial goods (as agreed by both sides), despite nine months having passed since the deal was signed in Turnberry.

In response, Eurogroup President Kyriakos Pierrakakis stated that the EU would resort to retaliatory measures if Trump follows through on his threats and actually raises tariffs on European cars.

However, as of today, the situation remains in limbo. Trump has yet to sign the decree to raise tariffs, while the Europeans signal that they are speeding up the implementation of the "Turnberry agreements." Specifically, according to Reuters, the European Parliament and the EU Council will continue negotiations to lower tariffs on imports of American goods starting Wednesday, just 2 days away. But whether these negotiations will succeed and whether Trump will await their outcomes remains an open question.

Thus, the prevailing bearish sentiment regarding the EUR/USD pair is well-founded and justified. However, despite sellers actively testing the support level at 1.1690 (the middle line of the Bollinger Bands indicator on the W1 timeframe), they have thus far been unable to establish themselves within the 16 figure—largely due to the ongoing uncertainty surrounding both the "Iran case" and American trade policy. In this context, it is sensible to consider short positions on corrective pullbacks with the first (and currently only) target for the downward movement set at 1.1690.