EUR/USD is under further selling pressure, drifting toward the 1.1400 mark, which puts it back near its lowest level for the year. This shift is primarily fuelled by a persistent strengthening of the US Dollar, as market participants are adopting a more wary, risk-averse stance while closely watching the Middle East conflict.
EUR/USD succumbs to extra downside momentum in quite a negative start to the week, approaching the area of yearly lows near the 1.1400 neighbourhood and retreating for the fifth day in a row.
The continuation of the deep retracement in the pair comes in response to the equally persistent advance in the US Dollar (USD), as investors favour the safe haven space in the current context of unabated geopolitical jitters in the Middle East.
Fed: steady, patient, and in no rush
The Fed delivered exactly what was expected, keeping rates unchanged at 3.50% to 3.75%. But if you look past the headline, the tone still leans slightly hawkish.
The broader backdrop has not really shifted: growth is holding up, the labour market remains relatively firm, and inflation is still described as somewhat elevated, all against a backdrop of heightened geopolitical uncertainty.
The real signal came from the projections, as inflation for 2026 was revised higher, and the longer run rate ticked up as well, pointing to more persistent price pressures. The rate path still suggests gradual easing, but the internal split is telling; some officials see no cuts in 2026, and one even sees rates moving higher into 2027.
The message is fairly straightforward: the Fed is comfortable where it is, and there is no urgency to ease.
Powell reinforced that view in his press conference: the economy continues to expand on solid consumption and productivity, while the labour market is only cooling gradually. At the same time, progress on inflation appears to have stalled somewhat, with energy and tariffs adding noise to the outlook.
Policy is seen as close to neutral or slightly restrictive, as there is no appetite to tighten further, but equally no rush to cut. For now, it is a classic wait-and-see, data-dependent Fed.
ECB: cautious, watching the risks closely
The ECB also stood pat, leaving all three key rates unchanged, with the deposit rate at 2.00%. But the tone was cautious rather than reassuring.
The Middle East conflict has clearly shifted the balance of risks, adding to inflation pressures while weighing on growth. That tension framed the meeting.
Projections were revised higher for inflation, particularly into 2026, while growth remains subdued. The central bank leaned more on scenario analysis, highlighting downside risks to growth and upside risks to inflation, especially in the event of further energy disruptions.
On the later, earlier on Monday, the ECB’s Yannis Stournaras added to that cautious tone, warning that a prolonged conflict could derail the bank’s baseline scenario. He also made it clear that if second-round effects start to show up or inflation expectations begin to drift, the ECB would need to react quickly.
Markets are still leaning towards further tightening, with around 70 basis points priced in by year end and a meaningful probability of a move as soon as late April.
EUR positioning: a clear reset
Positioning in the Euro (EUR) has shifted quite meaningfully in recent weeks.
Net longs have been steadily trimmed, dropping to just above 9K contracts in the week ending March 24. That is a sizeable reduction in bullish exposure and lines up with the loss of momentum from the 1.1600 area.
What stands out is the nature of the move after open interest declined, suggesting positions are being closed rather than flipped into shorts. This is not a bearish turn, it is more a story of fading conviction.
As a result, the market now sits in a much more neutral positioning environment. That reduces the risk of a crowded long squeeze, but it also removes an important layer of support for the Euro.
What’s next for EUR/USD
Near term: EUR/USD remains largely a US Dollar story. Geopolitics and trade tensions continue to dominate the narrative, while the focus this week shifts to the US labour market, including the Nonfarm Payrolls (NFP) release on Good Friday.
Risks: any escalation in the Middle East could quickly trigger fresh safe haven flows into the US Dollar. From a technical perspective, while below the 200 day Simple Moving Average near 1.1670, the risk of a deeper move lower is expected to pick up pace.
Technical landscape
In the daily chart, EUR/USD trades at 1.1457. The near-term bias is mildly bearish as spot holds below the clustered 55-day, 100-day and 200-day Simple Moving Averages (SMAs), which all trade above 1.16 and flatten after a prior topping phase, indicating persistent downside pressure beneath a broad cap. Momentum readings reinforce this tone, with the Relative Strength Index (RSI) slipping toward the mid-30s after failing to sustain rebounds above the neutral 50 line, while the Average Directional Index (ADX) remains elevated in the mid-30s, signalling a still-active downside trend rather than a range environment.
Immediate resistance comes at 1.1491, followed by 1.1578, where prior horizontal caps converge with the underside of the moving-average cluster to form a barrier to any corrective bounce. A break above 1.1578 would expose higher resistance at 1.1766, but sellers are expected to defend this broader supply area while the pair trades below the 1.16–1.17 region. On the downside, initial support is located at 1.1392, with a clear break opening the way toward the 1.13 area as the next bearish objective. The bearish bias persists as long as daily closes remain beneath 1.1578.
(The technical analysis of this story was written with the help of an AI tool.)
Bottom line: Dollar still calling the shots
The Dollar remains firmly in control.
For now, EUR/USD is reacting far more to developments in Washington than in Frankfurt. Until there is clearer direction from the Fed, or a more convincing recovery in the euro area, upside looks limited.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
