is bleeding. The pair dropped to an intraday low of 1.1698 during Monday’s European session — a level not seen in weeks — before clawing back marginally to trade near 1.1734. That’s a roughly 1% decline on the day, which in major FX terms is a violent move. The (DXY) surged 0.89% to 98.43, punching above 98.50 at one point for the first time since January 22. Everything driving this move is firing in the same direction: a geopolitical shock that structurally favors the greenback over the euro, domestic German data that just came in horrifically weak, and a Federal Reserve that has no incentive to cut rates while oil is screaming higher. The 200-day simple moving average on EUR/USD sits at 1.1666. It’s now firmly in the crosshairs.
The coordinated U.S.-Israeli military campaign against Iran — “Operation Epic Fury” — killed Supreme Leader Ayatollah Ali Khamenei over the weekend, struck more than 2,000 targets across the country, and triggered retaliatory Iranian missile and drone attacks on Bahrain, Dubai, Saudi Arabia, and U.S. military facilities across the Gulf. Hezbollah entered the fight from Lebanon. Explosions were reported near the U.S. embassy in Kuwait. President Trump told CNBC operations are “ahead of schedule” and has spoken of a four-to-five week timeline for continued military action with regime change as the explicit objective.
The immediate FX consequence is textbook: capital flees into the dollar. The DXY broke through the $98.02 resistance level on the 2-hour chart and is now forming higher lows along an ascending trendline. The 50-period EMA sits well below current price, while the 100-period EMA is flattening — a momentum acceleration signal. RSI on the Dollar Index reads 60, confirming strong buying pressure without yet reaching overbought territory. The next technical targets for DXY are $98.31, then $98.60, and $98.86. A clear break above $98.86 opens the door to $99.00. Support sits at $97.76 and $97.56.
The structural asymmetry between the U.S. and Europe is what makes this dollar bid so durable. America is energy independent. Europe is not. With the Strait of Hormuz effectively shut — Iran’s IRGC declared passage forbidden, Maersk suspended all crossings, more than 200 tankers are stationary outside the chokepoint — Europe’s reliance on Middle Eastern energy imports becomes an acute vulnerability. surged 9% to the $75–$79 range. European natural gas prices spiked nearly 50% after QatarEnergy halted LNG production at facilities struck during retaliatory attacks. Qatar supplies roughly 10% of Europe’s liquefied natural gas. Every tick higher in energy prices widens the competitiveness gap between the U.S. and Eurozone economies, and capital flows accordingly — out of the euro, into the dollar.
Economists are warning that a sustained move in oil toward $100 per barrel could add 0.6 to 0.7 percentage points to global inflation. For Europe, which imports virtually all its crude and a significant share of its gas, the pass-through to consumer prices would be even larger. That creates a stagflationary nightmare for the European Central Bank — growth slowing while inflation reaccelerates — and it’s the worst possible macro backdrop for EUR/USD.
Domestically, the euro received no help whatsoever from Monday’s data. German retail sales for January fell 0.9% month-over-month — massively worse than the consensus expectation of a 0.2% decline. Year-over-year growth decelerated to just 1.2%, confirming that German consumers are pulling back hard under the weight of tariff uncertainty, elevated prices, and now geopolitical fear. This isn’t a soft patch — it’s a consumer confidence collapse in the Eurozone’s most important economy.
The one silver lining in the German data picture was the HCOB Germany Manufacturing PMI, which rose to 50.9 in February — its highest reading in 44 months and the first time the index has crossed above the 50 expansion threshold in nearly four years. Under normal circumstances, that would be a meaningful positive for the euro. But these aren’t normal circumstances. The “war premium” on energy prices threatens to choke off any manufacturing recovery before it gains traction. Industrial production requires energy, and energy just got dramatically more expensive and less secure for every European manufacturer. The PMI bounce is likely a dead cat — one positive print that will be reversed if crude stays above $75 and European gas prices remain elevated.
On the U.S. side of the equation, the Federal Reserve has no reason to ease. The CME FedWatch tool shows just 4.4% probability of a March rate cut to 3.25–3.50%, with 95.6% of participants pricing rates unchanged at 3.50–3.75%. January’s core Producer Price Index came in at a scorching 0.8% month-over-month — the hottest monthly print since mid-2025. U.S. companies are passing tariff costs directly to consumers, and the administration’s invocation of Section 122 to impose universal 10% tariffs — with Trade Representative Jamieson Greer hinting at a potential escalation to 15% — adds another inflationary layer.
Fed Governor Stephen Miran floated the possibility of larger rate cuts if inflation pressures remain contained, but that commentary was issued before Iran’s supreme leader was killed and the Strait of Hormuz shut down. With oil at $73+ and climbing, the inflation outlook has shifted materially hawkish in 72 hours. The February ISM Manufacturing PMI and Employment Index, due later Monday, will provide the next real-time read on whether tariff and energy cost pressures are filtering into U.S. factory activity. Any upside surprise strengthens the dollar’s rate differential advantage over the euro.
10-year U.S. Treasury yields hovered near an 11-month low around 3.9% early Monday before bouncing back above 4.0% as oil’s rally reawakened inflation fears. That yield reversal is significant — bonds initially rallied on flight-to-safety, but the inflationary implications of sustained crude above $70 are starting to override the haven bid in Treasuries. Higher yields support the dollar. And the wider the U.S.-Eurozone rate differential remains, the more gravitational pull the greenback exerts on EUR/USD.
The technical damage on EUR/USD is severe and getting worse. On the 2-hour chart, the pair has broken decisively below the 1.1760 trendline that supported the late-February recovery. This constitutes a bearish triangle breakdown — price consolidated within narrowing boundaries after the drop from the 1.1920 region, and the resolution came to the downside. The 50-EMA has crossed below the 100-EMA on the short-term chart, confirming a bearish momentum signal. Both moving averages are now pointing lower.
RSI has dropped to 35–38 depending on the timeframe — deep into bearish territory but not yet technically oversold, which means there’s room for further selling before any mean-reversion bounce materializes. The downward-sloping trendline from the 1.1920 area remains intact, capping any relief rallies.
On the daily chart, EUR/USD has crashed below its recent 1.1870 low and is now pressing toward the 200-day simple moving average at 1.1666. Minor resistance appears at the February 19 low of 1.1870 and the February 6 low of 1.1766. The short-term outlook is bearish while the pair stays below 1.1766, targeting the 1.1700 region. The medium-term picture remains bearish below the 1.1831 late-February high. A move above 1.1790 would be required to invalidate the war-driven bearish thesis.
Immediate support sits at 1.1703 — Monday’s intraday floor. A sustained break below opens 1.1671, then the psychological zone at 1.1640, and ultimately the 200-day SMA at 1.1666. On the upside, the broken trendline at 1.1760 now serves as first resistance. The pivot zone for intraday control is 1.1730. Bearish invalidation requires a reclaim of 1.1790 — and given the macro backdrop, that level looks distant.
EUR/USD isn’t selling off in isolation. dropped to 1.3377 on the 2-hour chart after breaking the 1.3415 support level — reaching fresh year-to-date lows and approaching the critical 1.3300 handle. Price remains trapped beneath a descending trendline and below both the 50-period and 100-period moving averages, both pointing lower. RSI hovers near 40 — bearish but not extreme, leaving room for continuation. The downside targets are 1.3361, then 1.3312. Resistance is thick at 1.3457 and 1.3512. The sterling weakness confirms this is a systemic dollar bid driven by geopolitical haven demand, not euro-specific softness alone — though the euro is absorbing the worst of it due to Europe’s energy import dependency.
The is retreating from last week’s all-time high of 10,936, with the 20 February high and the February-to-March uptrend line at 10,745–10,738 representing potential downside targets. Minor resistance sits at the February 26 high of 10,871 and the record peak. The short-term outlook is toppish below 10,936, but the medium-term picture remains constructive above the February 6 low of 10,211. The FTSE’s composition — heavy in energy and mining — provides a partial hedge against oil-driven selloffs, but the broader European equity complex is under clear pressure as the opened down 1.8% with every sector except oil and gas in retreat.
WTI crude surged to $75.33 on Monday, with the June 2025 peaks at $77.10–$77.57 representing the next cap. A break above that cluster exposes the psychological $80.00 region. Support holds at the November 2024 high of $77.84, the October 2024 and April 2025 highs at $72.22–$72.36, and the November-to-December 2024 range at $71.38–$71.47. The short-term outlook is bullish above Monday’s $69.20 low. The medium-term is bullish above the February 26 low at $63.60.
For EUR/USD, oil is the transmission mechanism. Every $10 increase in Brent tightens the noose on European growth, widens the energy trade deficit, reawakens inflation that the ECB thought it had contained, and drives capital into dollar-denominated assets. If Brent sustains above $80 — and the Strait of Hormuz disruption suggests it could push toward $100 — the euro has no fundamental floor above the 200-day SMA at 1.1666, and potentially not even there.
The economic calendar is loaded and every release has direct implications for the dollar side of the pair. Monday brings the ISM Manufacturing PMI — a hot number reinforces the hawkish Fed case and pressures EUR/USD further. Wednesday delivers ADP private payrolls and the Fed’s Beige Book, which will capture regional anecdotes about tariff impact and energy cost pass-through. Thursday has Q4 productivity data. And Friday is the main event: February nonfarm payrolls, with economists forecasting 60,000 jobs added versus January’s 130,000. Unemployment is expected to hold at 4.3%.
Weak employment data would normally support EUR/USD by reviving rate-cut expectations. But in the current environment — with oil surging and inflation pressures re-emerging — the Fed may view labor softness as insufficient justification to ease. The bar for a dovish surprise that actually moves the needle on EUR/USD is much higher than it was a week ago. Conversely, a strong payrolls print would be devastating for the pair, confirming that the U.S. economy can absorb the geopolitical shock while Europe cannot.
The directional call is unambiguous. EUR/USD is a sell. The geopolitical backdrop structurally favors the dollar: America is energy independent, Europe is not. The Strait of Hormuz is closed. QatarEnergy has halted LNG production. European gas prices spiked 50%. Oil is at $75 and climbing. German retail sales just collapsed by 0.9% versus expectations of -0.2%. The Fed has no incentive to cut rates with PPI running at 0.8% month-over-month and tariffs escalating. The ECB faces a stagflationary trap. The DXY broke above 98.30 and is technically targeting 98.86–99.00. EUR/USD broke the 1.1760 trendline, the 50-EMA crossed below the 100-EMA, RSI is at 35, and the 200-day SMA at 1.1666 is the next major support.
The trade: sell rallies into the 1.1730–1.1760 zone, targeting 1.1670 first and 1.1640 on extension. Stop above 1.1790. The only scenario that reverses this trade is a rapid diplomatic de-escalation in the Middle East that reopens the Strait of Hormuz and sends oil back below $65 — and there is zero evidence that outcome is imminent. Trump has spoken of weeks of continued military operations. Iran’s retaliatory strikes are ongoing. Hezbollah is firing from Lebanon. Dubai is absorbing missile hits. This conflict is expanding, not contracting.
Until the shooting stops and tankers move through Hormuz again, the dollar is king and the euro is a funding currency. The 200-day SMA at 1.1666 is the next stop. If that breaks on a weekly closing basis, the pair opens toward 1.1500 — a level that seemed improbable a week ago but is entirely consistent with a sustained Middle Eastern energy crisis layered on top of an already fragile Eurozone economy. Sell the rallies. The war premium isn’t getting priced out anytime soon.
That’s TradingNEWS
