EUR/USD is currently positioned 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, illustrating an unmistakable downtrend. Since reaching its peak in January, the EUR/USD has declined by roughly 536 pips to its current level. That does not qualify as a correction. This signifies a shift in governance. The dollar maintains its dominance, while the euro finds itself on the defensive. All technical and fundamental indicators in the market are consistently signaling a downward trend. The decline has exhibited a systematic nature, resembling a trend, while also displaying sufficient volatility at critical junctures to ensnare bulls attempting to counter the selloff. The pair momentarily found support near the 1.1700 level following the early January drop, but subsequently reversed course, reaching a low of 1.1507 before experiencing a slight rebound — only to continue its downward trajectory. The recent bounce did not manage to convincingly reclaim the 1.1600 level, and the market is now testing the significant 1.1500 psychological threshold that has captured the attention of analysts monitoring this pair over the last fortnight.
The conflict in Iran that commenced on February 28 has had a distinct and quantifiable impact on the EUR/USD dynamic: it has exacerbated the economic disparity between the United States and the Eurozone in a notably detrimental manner. Brent crude has experienced a significant increase, now priced at $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 being factored into energy markets. 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 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 domestic energy resources and has been structurally compromised due to the decline in Russian gas imports post-Ukraine conflict. It is now confronted with an impending surge in energy costs, which projections indicate may elevate European inflation beyond 3% in the near future. Iran has clearly stated its goal — achieving $200 per barrel for oil — and European economic strategists currently lack a viable short-term strategy to address this aim. The United States stands as the foremost 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 support the dollar as global energy transactions are conducted in USD. The oil shock that negatively 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 a substantial alternative energy supply — neither of which appears to be on the horizon. In February, the headline Consumer Price Index registered a month-over-month increase of 0.3% and a year-over-year rise of 2.4%. Core CPI reported a monthly increase of 0.2% and an annual rise of 2.5%. Both figures were not disastrous, yet 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. The primary focus at this moment is on future implications: 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 a 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 reduction in September — a solitary cut, nine months into the year, in stark contrast to the previously expected more aggressive easing path. The recent repricing has provided significant support for the dollar. The elevated U.S. Treasury yields compared to their European counterparts expand the rate gap, which systematically encourages the movement of capital from lower-yielding EUR assets to higher-yielding USD assets.
The EUR/USD experiences a decline as the differential widens. It has been growing steadily 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. 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 upward movement. The RSI on the DXY is advancing toward the 60–65 range, which indicates there is still 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 support level. A confirmed break above 99.68 sets the stage for 100.00 and subsequently 100.32 — should this movement occur, 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 only scenario that could disrupt the dollar’s upward trend in the near term is a shift in Fed communication towards dovishness on March 18, or an unforeseen de-escalation in the Middle East that leads to a significant drop in crude oil prices.