The U.S. Dollar Index has fallen below its ascending trendline and dipped under the 50-day Simple Moving Average at $98.80, currently positioned at $98.20, with the 200-SMA at $99.50 acting as a significant resistance level above. The bearish candle structure, characterized by consecutive red candles with minimal lower wicks, indicates a persistent and conviction-driven selling pressure rather than a response of panic liquidation. The RSI is approaching 35, indicating that it is not oversold at this point, yet it is directionally affirming a shift in dollar momentum from neutral to distinctly weak. The prior consolidation range has been breached to the downside. If the $98.00 horizontal support fails to hold, the next target is $97.70 — and that move would result in a significant increase in EUR/USD during the same session it occurs. The decline of the dollar is unfolding within a multifaceted and paradoxical macroeconomic landscape. The collapse of U.S.-Iran peace negotiations over the weekend, coupled with President Trump’s directive for a complete U.S. Navy blockade of the Strait of Hormuz on Monday, generated a geopolitical shock that would typically have driven the USD higher due to safe-haven demand. The observation that it has not occurred — with the DXY currently at $98.20 and trending downward instead of surging past $100 — indicates a significant underlying aspect of the dollar’s position within its cycle. The influx of safe-haven demand into USD is currently being overshadowed by inflation expectations. With oil prices exceeding $90 per barrel, this is interpreted as a limitation on the Federal Reserve’s flexibility rather than a supportive demand shock for the dollar. This stagflationary surge in oil prices is fundamentally distinct from a commodity rally driven by growth, particularly regarding its implications for currency.
The 10-year Treasury yield has settled in the range of 4.29-4.32%, a level that has historically offered strong support for the dollar via the interest rate differential mechanism. Yet the DXY continues to show a downward trend. The divergence observed — with yields remaining stable while the dollar declines — indicates that the currency market is factoring in more than just interest rate differentials. It reflects a growing concern regarding the erosion of U.S. credibility as a reliable reserve currency during a time of increasing military engagements. This concern represents a more persistent and significant bearish influence than a straightforward rate adjustment. EUR/USD is currently positioned at 1.1790-1.1794, marking its peak value since the onset of the Iran conflict in late February. The pair has now progressed for seven consecutive sessions — a trend that signifies one of the most prolonged directional movements in the currency pair in more than a year. The 4-hour RSI has entered overbought territory at around 72, and the MACD histogram has turned positive, indicating that buying pressure is consistent and widespread, rather than stemming from a singular catalyst session. From the session low of the prior week to Tuesday’s high of 1.1790, EUR/USD has experienced a movement of around 140 pips in a direct trajectory. This represents a notable directional shift for a key currency pair within a short period. The occurrence of this movement amidst a U.S. Navy blockade of the Strait of Hormuz — which, in theory, should support the dollar through energy security considerations — adds to the structural importance of this development. The current market dynamics indicate that the medium-term bearish outlook on the dollar is prevailing over the short-term demand for the dollar as a safe haven. The price action, evidenced by seven consecutive days of gains in EUR/USD, serves as confirmation of this outlook.
The breakout above the $1.1750 resistance zone is technically sound and validated. The price is maintaining support within the range of $1.1720-$1.1750 — the prior peak is acting as the new base — and the pattern of higher highs and higher lows on the 4-hour chart remains intact. The ascending trendline established from the lows in late March currently stands around 1.1610, representing the critical structural support should a significant reversal occur. Between the current level at 1.1790 and the trendline support, there exists a buffer of 180 pips — indicating that the bullish trend can withstand significant adverse pressure before it is deemed technically invalid. The immediate resistance for EUR/USD is positioned at 1.1825 — a level that limited gains on February 26 and February 27, marking the first significant supply zone above the current price. A sustained close above 1.1825 paves the way for the February 9, 10, and 11 highs, which are around 1.1930. Breaking 1.1930 would represent a pivotal moment, as it would elevate the pair above all major resistance levels observed during the initial two months of 2026. This would validate that the repricing of the dollar’s reserve currency premium, influenced by the Iran war, has transitioned from a tactical maneuver to a fundamental reassessment.
The alternative scenario — where 1.1825 holds and EUR/USD reverses — presents distinct technical triggers. The initial significant downside level is the prior peak at 1.1720-1.1730. A breach beneath that area would alter the framework from bullish to neutral, revealing the lows from April 8-9 around 1.1650. Below 1.1650, the ascending trendline support from late March at around 1.1610 emerges as the critical level. A breach of 1.1610 on volume would indicate that the seven-session rally has run its course and that the pair is transitioning into a corrective phase towards the critical support at 1.1675 and possibly the 50- and 200-period moving average cluster at 1.16735. The overarching technical structure observed in the weekly chart provides significant insights: EUR/USD remained constrained beneath the 50- and 200-period moving averages during the majority of the early 2026 decline. The recent decisive reclaiming of both averages, coupled with the breakout above the 1.1750 resistance level, marks the most optimistic technical advancement for the pair since the pre-war surge. The TRIX indicator continues to exhibit an upward slope while remaining below the zero line, suggesting that the momentum of the long-term moving average still carries a bearish underlying bias that has not been completely reversed. A sustained move above 1.1825, coupled with the TRIX crossing above zero, would ultimately validate a comprehensive shift in the technical landscape for EUR/USD.