EUR/USD commenced Thursday around $1.1590, briefly striving to maintain the gains achieved over the previous two sessions, before plummeting beneath $1.1550 as Trump’s Wednesday night address regarding Iran was fully absorbed by Asian and European trading desks. As New York trading commenced, EUR/USD decisively breached the $1.1550 mark, dipping to a low of $1.1521 before a partial rebound nudged the pair back toward $1.1542 — the prevailing trading level as of April 2, 2026. The 52-week range of $1.0778 to $1.2079 provides a clear insight into the structural trajectory: EUR/USD has experienced a robust uptrend over the last twelve months, with a year-over-year gain of 6.73%. The selloff observed on Thursday should be viewed as a geopolitically influenced interruption of this trend, rather than a reversal. However, interruptions can transform into reversals when the underlying macro forces are as strong as those currently at play. The evidence suggesting that this pullback has more distance to cover before it reaches its limit is both compelling and specific. The clear catalyst for Thursday’s EUR/USD drop is evident. Trump’s address Wednesday night promised to strike Iran “extremely hard” in the coming two to three weeks, indicated that Iranian energy infrastructure could be a target, and offered no diplomatic framework for reopening the Strait of Hormuz. The speech caused a significant increase in oil prices, with Brent crude approaching $110 per barrel. This surge directly influenced concerns over European energy costs, which in turn impacted expectations for ECB rates and subsequently affected EUR/USD pricing. The relationship between Trump’s speech and EUR/USD at $1.1521 is straightforward. Determining the future direction of the pair is challenging due to the significant tension between the dollar’s safe-haven strength, the ECB’s evolving rate trajectory, and a technical structure that remains intact despite the pressure observed on Thursday.
The technical rejection at the 200-period Exponential Moving Average on the 4-hour chart represents a significant price action development in EUR/USD this week, and its importance is paramount. The pair experienced a rally on Tuesday and Wednesday, achieving a weekly high in the range of $1.1620 to $1.1625. This level aligns perfectly with previous swing highs and is notably significant as it coincides with the 200-period EMA on the H4 timeframe. The rejection at that level was quite pronounced. Multiple consecutive candles displayed long upper wicks as the pair made repeated attempts to breach $1.1625, only to be systematically sold back down each time. The series of unsuccessful breakout attempts at a significant moving average represents one of the clearest bearish technical indicators in forex analysis. The following decline beneath $1.1550 validated that the rejection was authentic rather than fleeting. The MACD on the 4-hour chart has retraced toward the zero line following a short-lived positive extension, accompanied by a contracting histogram — indicating a decline in bullish momentum rather than suggesting a neutral or accumulating scenario. The RSI has settled around 50, indicating a diminished sense of directional confidence following the pair’s earlier approach to overbought levels during this week’s recovery. The analysis of these three technical signals — the rejection of the 200-period EMA, the contracting MACD histogram, and the RSI retreating from a near-overbought position — leads to a clear near-term conclusion: EUR/USD faces constrained upside potential and significant downside risk in the near term.
On the daily chart, EUR/USD has been stabilizing within a tight range between $1.1407 and $1.1628 since mid-March 2026. A Hammer candlestick has emerged close to the $1.1407 support level, indicating a possible upward reversal. However, this signal is being overshadowed by the broader macroeconomic context. A Hammer candle near support carries little weight if the underlying fundamental factors are clearly trending downward. The RSI on the weekly chart is hovering near 45, suggesting a neutral-to-bearish outlook. The MACD is currently stabilizing within the negative range. The Money Flow Index is currently exhibiting a sideways movement close to its lower boundary, indicating a state of low liquidity and a lack of strong buying conviction. The technical outlook for EUR/USD is not dire; it is not a pair experiencing a significant downtrend. However, it consistently indicates a likelihood of continued pressure rather than a rebound. The current price of $1.1542 is positioned between two significant zones that delineate the pair’s short-term trading range. Immediate support is identified at $1.1520, a level that has consistently demonstrated reliability as an intraday reaction point in recent trading sessions. Below that, the 1.1485 to 1.1510 band represents the recent reaction low zone — the area where EUR/USD found buyers during the worst of the prior week’s selling pressure. A clean daily close below $1.1485 paves the way to $1.1450 as the next significant support level, and beneath that, the March low at $1.1410 emerges as the main downside target. If EUR/USD closes beneath the March low at $1.1410, the subsequent target is the Target Zone 4, ranging from $1.1218 to $1.1196 — a level indicative of a notable extension of the ongoing correction, returning the pair to price levels not observed since prior to the dollar’s long-term decline that commenced in early 2025. On the upside, immediate resistance is positioned at $1.1580, marking the base of the supply zone that stretches to $1.1610 to $1.1620. The 200-period EMA on the H4 chart, positioned around $1.1620 to $1.1625, serves as a significant barrier that has already thwarted two distinct rally attempts this week. A sustained daily close above $1.1628 — the top of the current consolidation range — would indicate the initial sign that bulls are regaining control of the pair, paving the way toward $1.1836 as the subsequent resistance target. Further above that, 1.2082 and 1.2346 are the medium-term targets if a genuine breakout materializes. The gap between the current trading level of EUR/USD at $1.1542 and the bullish threshold of $1.1628 is merely 86 pips — yet, given the prevailing macroeconomic conditions, those 86 pips could feel like an insurmountable distance.
The daily Dollar Index is presently positioned at $100.15, recovering from its upward trendline support around $99.30 and reaffirming its position above the 50-day SMA. The 200-day SMA around $99.00 served as a significant buy signal during the recent pullback and has remained intact. The DXY’s RSI has rebounded from oversold levels, moving back toward the 50 mark. Additionally, the formation of a bullish higher-low structure on the daily chart indicates that the dollar is currently in a recovery phase rather than experiencing a breakdown. If the DXY surpasses the $100.60 resistance level, the subsequent target is $101.12 — and each pip of dollar strength at those levels corresponds directly to EUR/USD weakness at the $1.15 mark and lower. According to data, there is currently a 76% probability that the ECB will implement a 25 basis point rate hike by June 2026. JPMorgan and Barclays have both updated their ECB projections to account for as many as three interest rate increases in 2026. The ECB’s current rate is 2.15%, while the Fed’s current rate stands at 3.75%. The rate differential between the two central banks stands at 160 basis points in favor of the dollar. While the ECB’s hiking trajectory is a positive development for the euro on its own, it is unlikely to significantly narrow that gap in the near term. The current situation with EUR/USD presents a paradox. Typically, the pricing of ECB rate hikes would signal a clear bullish outlook for the euro. However, this is being counterbalanced by the very reason the ECB is contemplating these hikes: ongoing energy price inflation resulting from the Iran war. Europe relies heavily on energy imports, and as Brent crude nears $110 per barrel, the Eurozone economy faces an energy shock that is both inflationary — prompting the ECB to consider rate hikes — and recessionary, as elevated energy costs squeeze consumer spending and business margins throughout the eurozone economy. The PMI data across the region reflects a mixed economic landscape, with certain countries reporting solid figures, while others indicate a downturn. The current PMI landscape presents a genuine challenge for the ECB’s rate decision. Raising rates in a decelerating economy to combat energy-induced inflation epitomizes the policy conundrum, and market participants are acutely aware of this situation.
The increase in the probability of an ECB rate hike to 76% for June indicates the market’s assessment that the ECB is likely to take measures to manage inflation, even if it means potentially exacerbating the slowdown in growth. However, the euro is not experiencing a rally due to that likelihood, as the energy shock propelling ECB hike expectations is concurrently dampening the economic outlook for the eurozone. This diminishes the carry appeal of EUR/USD compared to a dollar that is bolstered by safe-haven inflows and a Federal Reserve that is maintaining elevated rates for an extended period. The outcome is a currency pair characterized by both central banks adopting a hawkish stance concurrently. However, the inherent safe-haven demand for the dollar, particularly in a conflict scenario, provides the greenback with a competitive advantage that the ECB’s rate hike path is presently unable to surpass. The dynamics at play in Trump’s Wednesday address and its impact on EUR/USD are more complex than merely stating “dollar goes up, euro goes down.” The speech exerted pressure on EUR/USD through three distinct avenues, each contributing independently to the overall impact. Initially, it caused a significant rise in oil prices — with Brent nearing $110 and WTI exceeding $108 — which directly escalated Europe’s energy import expenses and exacerbated the growth disparity between the energy-exporting US economy and the energy-importing European economy. Second, it strengthened expectations for a Fed rate hike instead of a cut, as rising oil prices directly contribute to US inflation. A Fed that may increase rates is favorable for the dollar, irrespective of the actions taken by the ECB. Third, it triggered a global risk-off sentiment that directed safe-haven flows into the dollar specifically — not merely away from risk assets in general — as the dollar’s correlation with oil price strength in a wartime context has transformed the currency’s role to resemble that of a petrocurrency, benefiting from energy disruptions rather than being adversely affected by them.
The third point — the dollar’s role as a petrocurrency during the Iran war — represents a crucial structural change in forex markets in 2026 and warrants thorough consideration. In the past, increasing oil prices had an adverse effect on the dollar, as the US was a net importer of energy. The shale revolution altered the dynamics, and the conflict in Iran has now finalized this shift: the US stands as a net energy beneficiary from disruptions in the Persian Gulf. Elevated oil prices enhance domestic producer revenues, draw in safe-haven capital flows alongside energy revenue streams, and reinforce the dollar’s status as the currency of a commodity-producing safe haven concurrently. EUR/USD faces structural disadvantages in the current environment, as Europe finds itself on the unfavorable side of each of these dynamics. The dollar’s strength on Thursday was comprehensive — it impacted every major currency pair at once, indicating that the current situation reflects a widespread appreciation of the USD rather than a unique weakness in the euro. The GBP/USD (Cable) has breached the 0.5 Fibonacci retracement level around $1.3318 and has dipped below its 50-day SMA, currently positioned at $1.3206. The immediate target appears to be $1.3159, with the possibility of additional decline towards $1.3116. The 200-day SMA around $1.3356 has established itself as a significant resistance point for any recovery efforts in Cable. The RSI has decreased to around 40, indicating that bearish sentiment is strengthening rather than remaining neutral. GBP/USD temporarily regained $1.3250 following the Hormuz protocol news from IRNA, but those gains were relinquished as the initial enthusiasm diminished. The stagflation issue in the UK, characterized by persistent inflation and declining growth, coupled with the Bank of England’s steady policy amidst rising uncertainty, reflects the challenges faced by EUR/USD. However, the situation is further complicated by unique political uncertainties in the UK.
AUD/USD has experienced a significant decline, pulling back from the resistance level of $0.6850 — a point that has historically shifted between support and resistance. The pair may be poised for a move to $0.67 if the $0.6850 level fails to maintain its support on a closing basis. The Australian dollar exhibits relative strength against other risk currencies, attributed to the recent hawkish stance of the Reserve Bank of Australia. However, this partial insulation does not shield AUD/USD from declining during a significant episode of dollar strength, as witnessed on Thursday. The USD/CAD pair has experienced an increase, but it appears to be somewhat overextended in the short term following two significant upward movements. The 1.3950 to 1.40 level is demonstrating considerable resistance, while the 200-day EMA at 1.38 serves as a supportive floor for USD/CAD positioning. The Canadian dollar experiences a partial offset due to elevated oil prices, as Canada is a net oil exporter. This dynamic restricts the weakness of CAD against other currencies, despite the prevailing strength of the dollar driving USD/CAD higher. The current strategy for USD/CAD is to consider purchasing during short-term pullbacks instead of pursuing upward movements beyond $1.40. On Thursday, the percentage changes of the US dollar against major currencies reveal significant movements: USD appreciated by 0.42% versus EUR, 0.53% against GBP, 0.35% against JPY, 0.24% against CAD, 0.67% against AUD, 0.70% against NZD, and 0.45% against CHF. The New Zealand dollar exhibited the weakest performance against the dollar, a position that underscores its heightened sensitivity to global risk-off movements relative to other major currencies. The Australian dollar, as observed, ranked as the second weakest currency. The Canadian dollar and Japanese yen demonstrated stronger resilience, attributed to support from oil exports and their established roles as safe-haven currencies, respectively.