EUR/USD is showing tentative signs of recovery after finding a base near fresh yearly lows around 1.1400 just a few days ago. That said, as long as it remains below the key 200-day Simple Moving Average (SMA) near 1.1670, the pair still faces the risk of further downside in the near term.
EUR/USD quickly leaves behind Friday’s small decline and manages to reclaim the area above the key 1.1600 hurdle on Monday, all framed within a broad-based improvement in the risk-linked universe.
The pair’s firmer tone comes in response to the bearish performance of the US Dollar (USD), as investors continue to evaluate the fragile geopolitical landscape. However, latest comments from President Trump announcing that the US will delay any attacks to enery facilities in Iran seem to have brought some hope of an end to the hostilities, reigniting a mild demand of riskier assets.
Fed: no move, no rush
The Fed did exactly what markets expected, keeping rates unchanged at 3.50% to 3.75%. But beneath the surface, the tone leaned a touch more hawkish than the headline suggests.
The backdrop hasn’t shifted much. Growth is still holding up, the labour market remains steady, and inflation is still described as somewhat elevated. At the same time, uncertainty remains high, particularly with the Middle East situation in play.
The real signal came from the projections. Inflation for 2026 was revised higher, and the longer-run rate edged up, hinting at more persistent price pressures. The rate path still points to limited 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 pretty clear. The Fed is in no hurry, and the bar for cuts remains high.
Powell reinforced that tone. The economy is still expanding on the back of solid consumption and productivity, while the labour market is cooling only gradually. Inflation progress has stalled somewhat, with energy and tariffs adding noise to the outlook.
Policy is seen as close to neutral or slightly restrictive. There is no appetite to tighten further, but equally no urgency to ease. For now, it’s very much a wait and see, data dependent Fed.
ECB: steady, but not relaxed
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 comfortable.
The Middle East conflict has clearly shifted the balance of risks. It adds to inflation pressures while weighing on growth, and that tension framed the entire meeting.
Projections were revised higher for inflation, particularly into 2026, while growth expectations remain modest. The ECB also leaned more heavily on scenario analysis, highlighting downside risks to growth and upside risks to inflation, especially in the case of further energy disruption.
Lagarde struck a calm but deliberate tone. The ECB is “well positioned”, but not comfortable. Energy is likely to push inflation back above 2% in the near term, and second round effects are being watched closely, even as underlying inflation and wage pressures show some signs of easing.
EUR positioning: a sharp reset
On the positioning side, the story is quite clear, the market has taken a step back from the Euro.
The most recent figures from the Commodity Futures Trading Commission (CFTC), covering the week that ended on March 17th, reveal a steep decline in speculative net longs. They fell to roughly 21.1K contracts, a marked decrease compared to the prior week’s numbers.
At the same time, open interest fell notably to around 755.8K contracts, pointing to a broad reduction in participation. This looks much more like long liquidation than the build-up of fresh shorts.
Price action fits the narrative. EUR/USD softened over the same period, reinforcing the idea that the trimming of longs has fed directly into spot.
What it means
Put simply, the bullish Euro narrative has lost momentum.
This market isn’t crashing, not yet. Instead, it’s getting more careful. Investors are pulling back, scaling down their exposure as the landscape grows more unpredictable.
It feels more like profit taking and a reassessment than a decisive shift in direction.
FX takeaway
The Euro has lost a good chunk of its positioning support, leaving the market more balanced and less crowded.
In the short run, this lessens the likelihood of a sudden, painful long squeeze. However, it also takes away a key source of backing. To see EUR/USD climb significantly once more, the market will require a new spark – perhaps from the ECB, the Fed, or a general uptick in risk appetite.
EUR/USD: still a Dollar story
Near term: EUR/USD continues to take its cues from the Greenback. Geopolitics and trade tensions remain front and centre, while the upcoming preliminary PMI prints from both the euro area and the US will be the next key inputs.
Risks: any escalation in the Middle East could trigger renewed safe haven demand for the US Dollar. From a technical standpoint, a prolonged period below the 200-day simple moving average would increase the likelihood of a more significant decline.
Technical corner
In the daily chart, EUR/USD trades at 1.1633. The near-term bias remains mildly bearish as spot holds below the clustered 55- and 100-day Simple Moving Averages (SMAs) in the 1.1720-1.1680 band while also trading under the gently rising 200-day SMA near 1.1670, keeping the latest rebound within a broader corrective phase. The Relative Strength Index (RSI) hovers just below 50, signalling capped upside momentum after recovering from oversold territory, while the still-elevated Average Directional Index (ADX) above 35 indicates that the preceding downtrend retains underlying strength despite the recent pause.
Immediate resistance is located at 1.1766, where prior horizontal resistance aligns with the band of daily moving averages, and a daily close above this area would be needed to ease bearish pressure and open the way toward 1.2082. On the downside, initial support emerges at 1.1578, guarding the way to 1.1491, with a break there exposing the 1.1469 level ahead of the more distant 1.1392 area if selling resumes.
(The technical analysis of this story was written with the help of an AI tool.)
All in all, the dollar remains dominant.
Currently, EUR/USD is responding more to developments in Washington than those in Frankfurt.
Until there is clearer direction from the Fed or a more convincing recovery in the euro area, upside looks limited.
The US Dollar remains firmly in control.
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.
