EUR/USD is currently at $1.1463 on Monday, dipping below the significant 1.1500 threshold and reaching new multi-day lows, indicating a situation that suggests more than merely an unfavorable trading day. The pair encountered resistance A between 1.1648 and 1.1626 last week, was unable to maintain a position above this level, and has been retracing since then — achieving the initial bearish target at 1.1529 before proceeding further downwards. The upcoming objective is the March low at 1.1410, followed by Target Zone 4, which ranges from 1.1218 to 1.1196. These figures are not random; they serve as the foundational benchmarks that outline the trajectory of the EUR/USD bear trend and its current direction. The 52-week range for the pair spans from $1.0471 to $1.2079, with the current price at $1.1463 positioned in the lower half of that range, gradually moving toward the bearish end as each session unfolds. The 1-day change is -0.59%, or approximately -0.00678, which may seem modest at first glance. However, when considered alongside five consecutive weeks of risk-off sentiment, rising oil prices, and a Federal Reserve that has effectively ruled out rate cuts for 2026, the implications become more significant. The prevailing trend is clearly bearish, and the momentum indicators are validating this with a consistency that suggests opposing this movement is likely to be unwise. The U.S. Dollar Index is presently positioned within the 100.20 to 100.30 range, reflecting an increase of about 1.9% over the last month, having recovered significantly from the early 2026 lows of approximately 95 to 97. The 52-week high on the DXY is around 104.50, indicating that the index remains approximately 3.8% below its annual peak.
However, the directional momentum has clearly shifted in favor of dollar strength. On the 2-hour chart, the DXY is establishing a symmetrical triangle, characterized by a descending trendline resistance positioned between 100.30 and 100.35 — a level that has faced multiple tests without a definitive breach. The 50-period moving average has surpassed the 200-period moving average on the 2-hour chart, indicating a short-term bullish technical signal that reinforces the breakout setup. Buyers have been actively supporting pullbacks around 99.80 and 99.50 — both of which are levels where previous consolidation indicated demand. A confirmed close above 100.35 indicates a potential advance to 100.53 initially, with 100.75 serving as the subsequent significant resistance level. A failure to clear 100.35 sends DXY back to 99.80 support and then to the rising trendline at approximately 99.20. The trading strategy is clear: enter a position on a breakout above 100.35 with a target of 100.75, and set a stop-loss below 99.80. For EUR/USD, a DXY breakout above 100.35 presents a direct challenge — the strength of the dollar and the weakness of the euro are interconnected factors in this context. The forces behind the strength of the dollar are straightforward, yet they wield significant influence. Brent crude is trading above $107 a barrel — up more than 55% in March alone on track for a record monthly gain — and WTI crude has crossed $101. The current levels of oil are inherently inflationary. A sustained increase of 10% in energy prices contributes roughly 0.3% to 0.4% to the headline CPI over the course of a year. The recent surge in Brent prices, climbing 55% within just one month, raises significant concerns regarding inflationary trends. Core producer prices increased by 0.8% in January, marking the most robust monthly figure since mid-2025. The upcoming March data is expected to clearly demonstrate the impact of the oil shock in the coming weeks.
The Federal Reserve maintained its interest rates at 3.75% in March, whereas the European Central Bank stands at 2.15%. The 160 basis point differential clearly provides an advantage to the dollar from a carry perspective. However, the more significant factor at play is that the Federal Reserve is compelled to sustain — or possibly increase — interest rates due to the inflationary pressures exacerbated by the energy shock driven by the conflict. The CME FedWatch indicates that there are currently no anticipated rate cuts for the rest of 2026. A central bank unable to lower rates in a decelerating economy poses challenges for equities while benefiting the currency. The U.S. dollar is experiencing advantages from this very situation: it serves as the global reserve currency, the petrodollar — given that oil is priced in dollars worldwide — and acts as the main safe-haven asset amid geopolitical tensions. The situation in Iran is impacting all three dimensions at once, which explains why DXY has rebounded by 4% to 5% from its 2026 lows, despite the equity market entering correction territory. The daily chart for EUR/USD presents a clear bearish outlook. The pair was unable to maintain a position above the $1.22 resistance level earlier in 2026, subsequently entered a decline, and is currently trading significantly below both the SMA50 and SMA200, which are positioned above the current market price, acting as resistance instead of support. The MACD is showing a downward trend, while the RSI is descending into the 35 to 40 range — indicating that selling pressure is increasing rather than diminishing. A Symmetrical Triangle is emerging on the 4-hour chart, with the latest price action indicating that EUR/USD is rejecting the 1.1570 pivot level, which has transitioned from support to resistance. The 50-period moving average on the 2-hour chart has paused and is positioned below the 200-period average — a setup that technically indicates a corrective downtrend. The pair has fallen below a rising trendline that remained stable since mid-March, establishing a sequence of lower highs from 1.1669, indicating that sellers dominate at each upward movement. Should the trendline support at 1.1500 break decisively — as it seems to be doing on Monday — the subsequent targets are 1.1445 and then 1.1410. Should the pair fall below 1.1410, it aims for the Target Zone 4, which ranges from 1.1218 to 1.1196.
The strategy for EUR/USD suggests selling below 1.1485, aiming for a target of 1.1445, while placing a stop-loss above 1.1525. This setup is straightforward — it represents a trend continuation trade in a market exhibiting distinct directional momentum. The Federal Reserve’s rate stands at 3.75%, while the European Central Bank’s rate is at 2.15%. This results in a yield advantage of 160 basis points for assets denominated in dollars compared to those denominated in euros. The situation is further complicated by the Fed being pressured into potential rate hikes, while the ECB grapples with its own challenges — an economy that was already experiencing sluggish growth prior to the energy shock. This divergence in policy paths is becoming increasingly pronounced. The current inflation rate in the U.S. stands at 2.4%, while the EU experiences a lower rate of 1.9%. However, the oil shock resulting from the ongoing conflict is impacting Europe more severely, given its greater reliance on energy imports from the Middle East compared to the U.S., which has achieved a higher level of energy self-sufficiency thanks to shale production. The shale isolation effect is indeed significant: U.S. domestic energy production serves as a safeguard against the complete impact of $107 Brent on the U.S. economy, a protection that European economies lack. Germany, recognized as the economic powerhouse of the eurozone, was already experiencing an industrial recession prior to the onset of the oil shock. The ongoing political instability in France has consistently weighed on euro sentiment during 2025 and 2026. The interplay of an energy-dependent eurozone grappling with growth challenges and escalating import costs, alongside a potentially more hawkish ECB navigating the delicate balance between curbing inflation and preventing recession, coupled with a 160 basis point rate disadvantage against the dollar, presents a compelling structural argument for ongoing EUR/USD weakness.
The strength of the dollar extends beyond EUR/USD. GBP/USD is presently positioned around 1.3220 to 1.3240, declining to three-week lows and exhibiting a sequence of lower highs from 1.3447 — a similar trend is observed in EUR/USD. On the GBP/USD 2-hour chart, the pair has breached a supporting trendline that it had been following since mid-March. The 50-period moving average is trending downward and positioned below the 200-period average, indicating a classic downtrend configuration. The 1.3285 level that previously served as support is currently operating as resistance. A decline beneath 1.3218 sets the stage for 1.3175, and should that level not hold, 1.3128 emerges as the subsequent objective. The extent of the dollar’s rise — impacting both EUR/USD and GBP/USD at the same time — indicates that this is not merely a euro-centric issue but rather a widespread demand for the dollar, influenced by geopolitical risk factors, oil-inflation trends, and the Federal Reserve’s compelled hawkish stance. The strategy for GBP/USD reflects that of EUR/USD: initiate a sell position below 1.3230, aim for a target of 1.3175, and set a stop-loss above 1.3285. Fed Chair Jerome Powell is set to deliver remarks on Monday, and his perspective on the growth-inflation balance will directly influence whether the DXY surpasses 100.35 this week or if that event is postponed. The market is attentive to any indications regarding the Fed’s perspective on the economic implications of the Iran war, specifically whether it is viewed as predominantly inflationary — suggesting a case for sustaining or increasing rates, which would be supportive of a strong dollar — or predominantly recessionary — indicating a rationale for rate cuts, which would be detrimental to the dollar.
El-Erian of Allianz stated clearly on Monday morning that the market continues to hold a “transitory” perspective regarding the economic effects of the war. This viewpoint poses a significant risk, especially considering the 6% fiscal deficit currently being experienced by the U.S. If Powell indicates that the Fed is inclined to implement rate hikes to address oil-driven inflation, EUR/USD may test 1.1410 this week with strong determination. If he expresses apprehension regarding growth and paves the way for reductions, EUR/USD rebounds to 1.1522 and subsequently to 1.1570. The base case, considering Friday’s labor market data and the prevailing oil price level, suggests a hawkish Powell, which is bearish for EUR/USD. This week, in addition to Powell, the macroeconomic calendar is filled with events that could influence the dollar. On Tuesday, the JOLTS report will release job openings data for February. On Wednesday, the ADP private payrolls report for March will be released, accompanied by the ISM Manufacturing PMI. On Thursday, Initial Jobless Claims will be released. Friday wraps up the week with a significant event: Nonfarm Payrolls, Unemployment Rate, and the ISM Services PMI — all set to be released on Good Friday when markets are closed, leading to a potential gap risk for Sunday night futures. In February, there were notable job cuts as employers decreased payrolls, reflecting early indications of labor market weakness. Consequently, the March NFP will be the key figure to monitor this quarter. A figure falling short of 50,000 would indicate that the economic slowdown driven by the war is impacting employment, potentially prompting the Fed to adopt a more dovish stance, which could provide a temporary boost to EUR/USD. A robust figure exceeding 150,000 would solidify the narrative of no rate cuts in 2026 and propel EUR/USD straight towards 1.1410 and lower. The prevailing bear trend in EUR/USD suggests that a robust NFP is the more likely scenario for price movement: validation of the Fed’s hawkish stance, combined with an already bearish technical framework, propels the shift towards 1.1218 to 1.1196.