EUR/USD is currently at 1.1546 as of March 12, continuing a challenging three-day decline that has wiped out weeks of recovery efforts in just a few sessions. The pair reached a high of 1.2082 on January 27 — marking its highest level since June 2021 — and has subsequently established a clear pattern of lower highs and lower lows, indicating a definitive downtrend. Since reaching its peak in January, the EUR/USD has declined by roughly 536 pips to its current position. That does not qualify as a correction. This represents a shift in governance. The dollar holds the upper hand, while the euro finds itself on the back foot. Every technical and fundamental indicator in the market aligns, signaling a downward trend. The decline has exhibited a structured pattern, resembling a trend, while also displaying sufficient volatility at key inflection points to ensnare bulls attempting to counter the selloff. The pair momentarily found stability near the 1.1700 level following the initial breakdown in January, but subsequently reversed course, establishing a low at 1.1507 before experiencing a slight rebound — only to continue its downward trajectory. The recent bounce did not manage to regain 1.1600 with any strength, and the market is now testing the significant 1.1500 psychological level, which has captured the attention of every technical observer monitoring this pair over the last two weeks.
The conflict in Iran that commenced on February 28 has had a distinct and quantifiable impact on the EUR/USD relationship: it has exacerbated the economic disparity between the United States and the Eurozone in a notably adverse manner. Brent crude has experienced a significant increase, reaching $97 per barrel. WTI is currently priced at $93. The International Energy Agency took action by approving the release of more than 400 million barrels from strategic reserves, with the U.S. accounting for over 172 million barrels, yet oil prices continued to rise. This indicates the extent to which the supply disruption is currently reflected in energy market pricing. Iraq has declared a suspension of port operations at its oil export terminals following the targeting of two tankers in the Persian Gulf. The risk of disruption in the Strait of Hormuz is not merely a theoretical concern; it is currently influencing the repricing of global energy markets. Europe, in contrast to the United States, lacks the capacity to generate its own solution to this issue. The continent faces constraints in its domestic energy resources and has been structurally compromised by the decline in Russian gas imports due to the Ukraine conflict. It is now confronted with an impending surge in energy costs, which projections indicate may elevate European inflation beyond 3% in the upcoming months. Iran has clearly stated its goal — achieving oil prices of $200 per barrel — while European economic strategists currently lack a viable short-term strategy to address this aim.
The United States stands out as the leading oil producer globally. Increasing oil prices boost revenue for American producers, create challenges for the Fed’s easing strategy, yet do not signify a critical energy import crisis, and ultimately maintain demand for the dollar as global energy transactions are conducted in USD. The oil shock that adversely impacts the euro simultaneously bolsters the structural demand for the dollar. The current asymmetry serves as the foundation of the EUR/USD bearish outlook, and it is unlikely to change until there is a de-escalation of the conflict or Europe secures alternative energy supplies on a large scale — neither of which appears to be on the horizon. February headline CPI reported a month-over-month increase of 0.3% and a year-over-year rise of 2.4%. Core CPI recorded a monthly increase of 0.2% and an annual rise of 2.5%. Neither figure was disastrous, but neither provided the market with the green light to factor in a dovish stance from the Fed. The 2.5% core reading, although close to recent lows, continues to exceed the Fed’s 2.0% target significantly. Currently, the primary concern is the future outlook: with oil priced at $97 per barrel and the ongoing conflict in Iran showing no signs of resolution, an increase in energy costs reflected in consumer prices over the next two to three monthly CPI reports is virtually assured. The market has undergone significant repricing. Earlier in 2026, it was anticipated that multiple Fed rate cuts would be part of the base case for the first half of the year. The prevailing consensus has been thoroughly dismantled. The only rate cut currently anticipated by futures markets is a 25 basis point decrease in September — a solitary reduction, nine months into the year, in stark contrast to the previously expected more assertive easing path. The repricing has provided significant support for the dollar. The elevated U.S. Treasury yields compared to their European counterparts expand the rate differential, which systematically channels capital from lower-yielding EUR assets into higher-yielding USD assets. The EUR/USD experiences a decline as that differential widens. The expansion has been ongoing and unyielding since January.
The U.S. Dollar Index is currently positioned at approximately 99.39, slightly under the significant resistance threshold of 99.68, following a recent peak of 99.70 reached earlier this week, marking a 15-week high. The DXY has achieved three consecutive days of gains, supported by increasing oil prices and a resurgence in safe-haven demand. The technical outlook for the dollar appears positive — the index is consistently trading above its 50-day EMA and 200-day EMA, indicating a solid foundation for potential further increases. The RSI on the DXY is advancing toward the 60–65 range, indicating that there remains considerable potential for movement before entering overbought conditions. The 0.236 Fibonacci level at 99.18 is serving as immediate support, whereas the channel midpoint and 0.382 Fibonacci at 98.87 indicate a more substantial base. A confirmed break above 99.68 sets the stage for 100.00 and subsequently 100.32 — should this scenario unfold, it would have significant implications for EUR/USD. Each 50-pip increase in DXY approaching the 100 level results in a corresponding compression of EUR/USD towards 1.1450 and possibly 1.1391. The sole situation that could disrupt the dollar’s ascent in the short term is a shift in Fed communication towards a more dovish stance on March 18, or an unforeseen de-escalation in the Middle East that leads to a significant drop in crude oil prices.