EUR/USD Analysis: The Euro Attempts to Recover Amid Persistent Tensions
Author: Julian Pineda, CFA, CMT - Market Analyst
Date: March 9, 2026
Market Overview
At the beginning of the trading week, the EUR/USD currency pair experienced a decline of nearly 1.00%. However, this downward trend quickly reversed, leading to a phase of short-term neutrality. Despite this stabilization, geopolitical tensions in the Middle East and a neutral outlook for US monetary policy continue to support the strength of the US dollar.
Geopolitical Tensions
The ongoing conflict in the Middle East has intensified, with missile and drone attacks escalating. Iran's appointment of a new Supreme Leader indicates a lack of intent to de-escalate the situation, contributing to a prolonged regional crisis. This uncertainty has driven WTI crude oil prices close to $120 per barrel, a level not seen since 2022.
While initial demand for US dollars surged due to the conflict, this demand has moderated recently, primarily due to stable US bond yields. The DXY index, which measures the dollar's strength, has shown signs of neutrality around the 99-point mark.
Central Bank Outlook
The European Central Bank (ECB) is expected to maintain its deposit rate at 2.00%, with a high probability of no significant changes in the near term. Similarly, the Federal Reserve is also leaning towards a neutral rate outlook, with expectations that the rate will remain at 3.75% for the upcoming March meeting.
This neutral stance from both central banks suggests that the interest rate differential between the US and the eurozone could favor dollar-denominated investments, potentially leading to sustained selling pressure on EUR/USD.
Technical Analysis
Key Levels for EUR/USD
- 1.17656: Key resistance level, aligning with the emerging downward trendline.
- 1.16709: Near-term barrier, acting as a neutrality zone.
- 1.15069: Major support level, a break below could indicate a stronger downward trend.
The Relative Strength Index (RSI) remains below the neutral level, indicating bearish momentum, while the MACD histogram supports the prevailing downside bias. A potential downward trendline has formed, suggesting that if selling pressure stabilizes, a structural shift could occur in the coming sessions.
Conclusion
In summary, the EUR/USD pair is currently in a phase of indecision, influenced by geopolitical tensions and a neutral monetary policy outlook from both the ECB and the Federal Reserve. Unless significant new events arise to alter risk perceptions, the pair is likely to remain in this neutral state, with potential for renewed dollar demand if the conflict escalates further.