Current Setup and Live Chart
The EUR/USD finds itself in the middle of a USD bid this Thursday, as new worries about the energy shock drives risk-off sentiment and a flight to safety. The Euro has dipped to 10-day lows versus the greenback, as the geopolitical tensions in the Middle East drove oil prices back above $100 per barrel.
The US Dollar Index remains near 10-day highs on renewed safe-haven demand, and a Reuters poll indicates that many analysts are expecting the US Federal Reserve to delay rate cuts due to the inflationary pressures from the oil shock risk premium.
EUR/USD: Macro Drivers
1) Energy Shock Negatively Impacts EU Business Activity
Business activity within the Euro area contracted more than expected in April, as rising energy costs due to Middle East geopolitics hit demand and fuel inflation. The situation complicates the outlook for the ECB rate pathway, with markets still leaning towards a rate hike despite weaker growth.
The ECB has explicitly stated that the EUR/USD is closely tracking European energy prices. This is an inverse correlation, as the Euro area is a net energy importer. This means that rising energy prices piles pressure on the Euro, capping the EUR/USD.
2) Safe-haven USD Demand is Back
The latest firming of the USD is directly linked to worsening Middle East tensions following the stalemate in talks between the US and Iran. This is supplying the drive for a risk-off mood following a rise in oil prices above $100 per barrel this Thursday.
3) “Higher-for-longer” Expectations Are Back
Reuters reports that the markets are now expecting the Fed to delay rate cuts because if the energy-driven inflation risk. This scenario is bearish for the Euro but supportive for the USD.
EUR/USD Current Price Catalysts
1.War/Strait of Hormuz headlines: Oil prices are now a major FX driver for relevant pairs such as the EUR/USD. If oil is above $100 and the oil shipping blockade continues, then the EUR/USD will remain under pressure due to the risk-off USD demand.
2.U.S. data (jobless claims / PMI): After a lull post-pandemic, jobless claims are now becoming topical once more. The PMI and jobless claims data will show if the oil shock is starting to challenge growth, a scenario which can swing US bond yields and the US Dollar.
3.Rate pathway: Changes in the ECB’s tone, with regard to inflation persistence and reduced growth, could become relevant with time.
EUR/USD Forecast Scenarios
Base case: EUR/USD will trade in a choppy manner with downside bias as long as oil stays above $100. The USD will remain supported by safe-haven interest and repricing of rates to higher-for-longer.
Bull case: The Euro will recovery when there are credible de-escalation headlines. This will cool oil prices and return the markets to risk-on sentiment.
Bear case: renewed escalation (or prolonged standoff) keeps oil >$100 and reinforces delayed Fed cuts.
EUR/USD: Technical Outlook
The break of the trendline enabled the bulls to reclaim the 1.1813 resistance. However, rejection at this resistance has occurred, followed by a pullback that is now testing the previous resistance zone at 1.1673-1.1703, now acting as a support. If this zone holds firm, a bounce could occur and give the bulls an opportunity to retest the 1.1813 resistance. A break of this barrier brings in the 9 February 2026 high at 1.1921 into the mix.
On the flip side, a breakdown of the support zone and the trendline makes a case for a push towards the double bottom’s neckline at 1.1618. A secondary support exists at 1.1550, the 13 October 2025 low.
