On Tuesday, the EUR/USD currency pair is trading lower, moving toward its yearly low.

Yesterday, on Monday, at a meeting of the European Parliament committee, European Central Bank (ECB) President Christine Lagarde stated that a measured monetary policy response remains appropriate, as there are currently no signs that rising energy prices are leading to higher wages. Lagarde's attempt to cool market expectations of a more aggressive rate-hiking cycle disappointed euro bulls.

On the other side of the EUR/USD pair, the U.S. dollar continues to strengthen amid the Federal Reserve's hawkish policy and geopolitical developments.

U.S. President Donald Trump rejected Iran's proposal to cease hostilities and immediately reopen the Strait of Hormuz on the condition that Iran's demands be met. Nevertheless, according to press reports, Trump is prepared to consider easing sanctions against Iran and unfreezing its assets if concrete progress is achieved regarding the country's nuclear program.

The U.S. Federal Reserve forecasts another interest rate hike by the end of this year, after raising rates by the expected 25 basis points earlier this month for the first time in more than three years. Concerns about inflation driven by higher energy prices are strengthening expectations of further monetary policy tightening by the Fed, contributing to U.S. Treasury yields rising to multi-year highs. This, in turn, allows the dollar to remain near the two-month high reached last Thursday and supports the negative outlook for EUR/USD.

At the same time, the overall fundamental background appears more favorable for U.S. dollar bulls, suggesting that the path of least resistance for EUR/USD is downward.

From a technical perspective, sentiment toward EUR/USD remains bearish in the near term; however, a decisive break below the key support level at 1.1350 is needed to confirm the scenario of further decline. In this case, the pair could fall toward the current year's low of around 1.1322, set in June, and then toward 1.1300.

As for an upward move, any recovery attempts are likely to attract new sellers around the 1.1400–1.1460 supply level. A break above this zone would allow EUR/USD to rise above the psychologically important 1.1500 level; however, the advance is likely to be capped by the 200-day EMA at 1.1560. The oscillators are negative, confirming the bearish outlook, while the Relative Strength Index is in the oversold zone, indicating the possibility of a correction.