Euro Outlook: EUR/USD Squeeze Risk Grows on TACO Trade
Author: David Scutt, Market Analyst
Date: March 9, 2026
Summary
The EUR/USD currency pair has faced significant downward pressure since the onset of the Iran conflict. However, recent signals of de-escalation and potential easing of sanctions on Russian oil may provide a catalyst for a rebound in the euro.
President Donald Trump indicated that the conflict with Iran might be nearing completion, which has historically led to market reversals. This expectation of de-escalation often results in rapid market reactions, creating opportunities for traders.
Market Dynamics
Reports suggest that the U.S. administration is contemplating easing sanctions on Russian oil, which could help alleviate the energy supply disruptions caused by the conflict in the Middle East. This is particularly significant for Europe, which heavily relies on imported energy.
Interestingly, the correlation between energy prices and the euro has recently turned negative, indicating that the initial energy shock has been priced in, and other market forces are now influencing the euro's movements.
Technical Analysis
On the technical front, bullish reversal signals have emerged from a key support zone for EUR/USD. The appearance of bullish hammer candles suggests a potential rebound, especially as the pair approaches significant support levels established in previous months.
The Relative Strength Index (RSI) is showing signs of recovery, indicating that downside pressure may be easing. A critical resistance level to watch is the 200-day moving average (DMA), which could serve as a target for a potential upward squeeze if positive sentiment continues.
Trading Strategy
Traders may consider entering long positions on pullbacks towards the support level of 1.1579, with a stop-loss placed just below this level. The initial target could be the 200DMA, with further upside potential if the price breaks above 1.1683.
Conclusion
With limited economic data expected to influence the market, sentiment and price action will likely dictate the direction of EUR/USD in the near term. The potential for a squeeze higher remains, contingent on the continuation of positive developments regarding the Iran conflict and energy supply dynamics.