The EUR/USD pair ends the week around 1.1530, barely below its opening but off the peak at 1.1640. Widespread optimism on Monday was diluted as days went by, and financial markets moved once again on war-related headlines.
United States pauses attacks on Iran
Investors cheered the Monday news, as United States (US) President Donald Trump announced a five-day pause in attacking Iran’s energy facilities, and opened the door for diplomatic talks. His words sent the US Dollar (USD) nosediving, while crude Oil prices retreated. Hopes for a soft resolution of the conflict, however, faded with continued back-and-forth attacks in the Persian Gulf and contradictory Trump’s announcements.
The Pentagon announced it would deploy about 2,000 troops to the Middle East, bolstering the US military presence in the region. Throughout the week, he announced talks and negotiations that do not seem to have progressed. Meanwhile, the Strait of Hormuz remains closed, further disrupting energy supplies.
On Thursday, President Trump announced a ten-day extension of the pause, until April 6. But his words fell in dumb ears. By the end of the week, the barrel of West Texas Intermediate (WTI) crude oil trades at around $95, while the Greenback advances amid renewed concerns about the war extending in time.
Inflation is the key
The Iran war is a direct arrow to the heart of inflation. Despite major economies working for decades on green energy, the world still depends on fossil fuels. Disruptions in gas and oil delivery alongside higher commodity prices are a stairway straight to mounting inflationary pressures.
At a different time, the situation may not have been that serious in terms of the economic impact. But when major economies are barely leaving behind the post-pandemic inflation chaos, it is terrible. Central banks reached a delicate balance after easing monetary policy over the last few years, and most were at the end of the loosening cycle. Mounting price pressures change it all.
March monetary policy meetings showed policymakers turned hawkish. European Central Bank (ECB) President Christine Lagarde noted that policymakers are currently facing “profound uncertainty,” adding that the ECB will respond agilely, yet reiterating that decisions will be taken meeting-by-meeting and will depend on data.
Across the pond, the Federal Reserve (Fed) is between a rock and a hard place. There are multiple factors playing there. One is that the current Chairman, Jerome Powell, is meant to end his term in May. His replacement, Kevin Warsh, has yet to be approved by Congress. The other is that President Trump demands much lower interest rates, when the macroeconomic scenario points to rate hikes. Finally, the Fed’s path before the war suggested the central bank would trim rates this year, and an unlikely scenario is that the war extends.
Growth stable in March
According to data released in the last few days, growth remained steady in March at both shores of the Atlantic. The Hamburg Commercial Bank (HCOB) released the flash estimates of the Purchasing Managers’ Indexes (PMIs) for Europe, with German and the Eurozone figures easing from February readings yet holding in expansionary territory. The Euro bloc Composite PMI printed at 50.5, down from the 51.9 confirmed in February and below the 51.1 expected. In the US, the S&P Global Composite PMI resulted at 51.4 in March, down from the 51.9 posted in February.
Other than that, Germany released the March IFO survey on Business Climate, which eased to 86.4 from 88.4 in February.
Shortened but busy week ahead
The upcoming days will be quite busy in terms of the macroeconomic calendar, despite most major economies celebrating Easter, and several markets will be closed from mid-Thursday until Monday.
Germany will open the macroeconomic calendar on Monday, publishing the preliminary estimate of the March Harmonized Index of Consumer Prices (HICP). Annualized inflation, according to the HICP, stood at 2% in February. Tuesday will bring German Retail Sales and the Eurozone HICP for March, previously at 1.9% YoY.
The focus will then shift to the US, as the country will publish Consumer Confidence for the same month and February Retail Sales. It is also the first week of the month, which means US employment-related figures will take centre stage. The US will release JOLTS Jobs Openings, the ADP Employment Change survey, Challenger Job Cuts and the usual weekly unemployment figures ahead of the Nonfarm Payrolls (NFP) report scheduled for Friday. In the meantime, the US will publish the March ISM Manufacturing and Services PMIs.
Macroeconomic data will partially reflect the impact of the Iran war in local economies, while clearer repercussions are likely to come with April figures. In the meantime, war-related headlines will be the main market mover, as speculative interest rushes to price in the potential impact of the latest developments on inflation and future central bank decisions.
EUR/USD technical outlook
From a technical standpoint, EUR/USD is bearish. The daily chart shows that the pair failed to sustain gains above a bearish 20 Simple Moving Average (SMA), which heads firmly lower below directionless and converging 100 and 200 SMAs. The shorter one now provides resistance at around 1.1570. At the same time, the Momentum indicator regained downward traction after testing its midline, heading firmly north within negative levels. Finally, the Relative Strength Index (RSI) indicator stabilized around 41, failing to provide directional clues but adding to the dominant bearish tone.
On a weekly basis, the risk also skews to the downside. EUR/USD stays below a flat 20 SMA for the third consecutive week, currently at 1.1680. The longer moving averages maintain modest upward slopes below the current level, limiting the long-term bearish potential. Finally, technical indicators consolidate below their midlines, reflecting the lack of progress of the last few days.
Support comes at 1.1470, a long-term static area, followed by the 2026 low at 1.1411. A break below the latter will confirm the long-term downward bias and expose the 1.1300 area.
Economic Indicator
Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months’ reviews and the Unemployment Rate are as relevant as the headline figure. The market’s reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.
