By Justin McQueen

May 6 (Reuters) - Resurgent optimism over a possible Iran peace deal has produced a constructive tone for EUR/USD, but it is still stuck in a well-trodden 1.1675-1.1800 range for now and a lot of diplomacy lies ahead.

Developments in the Middle East are dictating the state of play across FX, while market participants are assessing price action in USD/JPY that has raised suspicions about another round of intervention in the yen.

Intervention has not been confirmed, but the move and volume are consistent with prior episodes. On balance, USD topside appears capped despite U.S. data remaining robust.

Focus now shifts to Iran’s response – expected within the next 48 hours – to the U.S. proposal which will set the tone going forward. Eyes are on oil as a real-time geo risk barometer, which for EUR has been the cleanest indicator for near-term direction.

Positioning is still light, so a more concrete deal outcome has room for EUR longs to build. A break above 1.1800 would open the way to resistance at 1.1830, and clearing that would bring 1.19 into focus in short order. On the downside, the 200-day moving average is the floor for now.
USDJPY 30 minute chart


EURUSD pos


eurusd hourly chart


Justin McQueen is a Reuters market analyst. (The views expressed are his own) ((Email: ))