The euro is getting annihilated. plunged more than 1.5% from Friday levels to hit fresh 2026 lows near 1.1570 on Tuesday, extending Monday’s heavy losses as the U.S.-Iran conflict entered its fourth day with zero signs of de-escalation. The pair sliced through 1.1670 support, through 1.1640, and is now pressing against the 1.1575 zone with momentum accelerating to the downside. The single currency has not traded at these levels since late 2025, and the technical, fundamental, and geopolitical picture all point in the same direction: lower.
The reason EUR/USD is collapsing while the dollar surges is not complicated, but it is devastating for anyone positioned long euros. Europe is structurally more exposed to Middle Eastern energy disruptions than the United States. The U.S. is a net energy exporter. Europe is not. And when the Strait of Hormuz gets shut down and Qatar’s largest LNG facility gets knocked offline by Iranian drones, it is Europe — not America — that faces an existential energy price shock.
European natural-gas futures have exploded more than 70% in just two trading sessions. Dutch TTF contracts topped EUR 62 per megawatt-hour on Tuesday after QatarEnergy suspended production at the Ras Laffan complex following an Iranian drone strike, then subsequently halted downstream products including aluminum, urea, polymers, and methanol. Gas prices had already surged 40% on Monday alone after the effective closure of the Strait of Hormuz. The last time Europe faced this kind of energy shock was 2022, when Russia weaponized gas supplies — and that episode pushed the euro below parity with the dollar. The current trajectory, if sustained, carries echoes of that crisis.
The ripped 1.07% higher to 99.42 on Tuesday, its strongest reading in a month, as global capital fled into the greenback. Over the past five days, the dollar has gained 1.7%. Mizuho strategists made the essential point: a market that spent the past year enthusiastically positioning for de-dollarization is getting caught out by a terms-of-trade shock that forces everyone back into USD liquidity. Settlements happen in dollars. Hedging happens in dollars. Energy purchases happen in dollars. And the U.S. — as a net energy exporter — actually benefits from higher oil prices on a relative basis versus Europe and Asia.
The de-dollarization narrative had driven the DXY down more than 7% over the past 12 months. That decline is now reversing at speed. The dollar is not rallying because anyone loves the U.S. economy; it is rallying because in a genuine crisis, there is no substitute for dollar liquidity. EUR/USD is the direct casualty of that dynamic, since the euro carries approximately 57% of the DXY weighting. Every tick higher on the dollar index translates almost directly into a tick lower on the pair.
The Commitment of Traders data from the CFTC confirms that the bullish euro trade is getting liquidated. Net-long EUR/USD exposure declined by 36,000 contracts last week among large speculators and asset managers combined. The move was driven primarily by long liquidation — traders closing out bullish euro bets rather than aggressively initiating new shorts. Gross longs fell across both groups, while short positions edged up by 2,800 contracts (2.1%) among asset managers and 1,000 contracts (0.7%) among large speculators.
The unwinding started before the Iran strikes even occurred, reflecting broader erosion of conviction in the euro bull case. But the geopolitical escalation has now turbocharged the liquidation. If short positioning builds more aggressively in coming weeks — and the conditions for that are clearly in place — EUR/USD faces a potentially extended move lower.
On the dollar side, futures traders trimmed their aggregate net-short USD exposure by $3.2 billion to negative $19.6 billion last week. Large speculators on the Dollar Index reverted to net-short after a one-week flip to net-long, and asset managers remained modestly net-short. The picture is mixed, but the direction of change — less bearish on the dollar, less bullish on the euro — is unmistakable and was already in motion before the war began. The conflict has simply accelerated a rotation that COT data was already flagging.
Tuesday’s Eurozone inflation data added another layer of complexity. Core Harmonized CPI for February printed at 2.4% year-over-year, above the 2.2% consensus and the prior 2.2% reading. The month-over-month core reading came in at 0.8%, a sharp reversal from the negative 1.1% in January.
Under normal circumstances, hotter-than-expected inflation would be euro-positive because it reduces the likelihood of ECB rate cuts. But these are not normal circumstances. The inflation is being driven by energy costs that are simultaneously destroying European economic activity. German retail sales already revealed a sharper-than-expected decline in household spending at the start of 2026. The Stoxx 600 cratered 3.34% on Tuesday. European bank shares fell 3.8%, insurers dropped 4.2%, and miners lost 3.9%.
The ECB is trapped. Cutting rates into a stagflationary energy shock risks further euro weakness and imported inflation. Holding rates risks choking off an already fragile recovery. The market is currently leaning toward the view that the growth damage will ultimately dominate, which is why the euro is falling despite the hotter CPI print. If February headline inflation comes in below the ECB’s 2% target (as some forecasters expect once the data is fully released), it would reinforce the case for a more accommodative stance — and that would be another leg down for EUR/USD.
The euro’s weakness is not happening in isolation. crashed to three-month lows near 1.3300 on Tuesday, down nearly 1% on the session, as the same dollar-strength dynamic that is destroying the euro hit the pound. UK Chancellor Rachel Reeves is presenting her Spring Statement Tuesday, and while no sweeping policy changes are expected, the inflationary implications of higher energy costs have already reduced expectations for a Bank of England rate cut this month.
Asset managers have pushed their net-short GBP/USD positioning to 110,000 contracts — just 2,500 contracts shy of an all-time record, according to the latest COT data. They are simultaneously increasing short bets while trimming longs, a textbook bearish configuration. Large speculators are also net-short at 57,000 contracts, though their positioning is less extreme.
The synchronized weakness in both EUR/USD and GBP/USD confirms that this is a broad dollar-strength event driven by geopolitical risk and energy repricing, not a euro-specific or pound-specific story. Any currency that is not the dollar — or not tied to commodity exports (Canadian dollar gained on Monday, Australian dollar steadied on LNG export expectations) — is getting sold.
The CME FedWatch tool now shows a 53.5% probability that the Federal Reserve holds rates steady at the June meeting, up from 42.7% on Friday. The probability of two or more quarter-point cuts this year has crashed to 57% from 79% just three days ago. The five-year breakeven inflation rate climbed to 2.535% from 2.458%. The 10-year Treasury yield surged to 4.095%, up nearly 15 basis points from Friday’s 3.95% close.
The driver is obvious: topped $85 a barrel, surged 8.24% to $77.10, and ISM Manufacturing Prices Paid exploded to 70.5 versus expectations of 59.5. Factory input costs are accelerating at a pace that makes further rate cuts extremely difficult to justify. Some analysts are now floating the possibility that the Fed may need to consider rate hikes rather than cuts if crude remains elevated for the four-to-five-week timeline that President Trump has projected.
For EUR/USD, this is a double blow. The Fed is repricing hawkish while the ECB faces pressure to cut into a weakening European economy. The interest-rate differential is widening in the dollar’s favor, which provides a fundamental gravitational pull that keeps EUR/USD under sustained pressure.
The pair is trading well below its 50-period Exponential Moving Average, confirming the dominance of the bearish corrective trend on the short-term timeframe. The bounce from the 1.1670 support level that was noted by technical analysts as a potential recovery point proved fleeting — prices briefly reclaimed some ground but failed to sustain any momentum above 1.1750 resistance.
The RSI has offloaded its oversold conditions from earlier readings, but the relief rally amounted to nothing more than a dead-cat bounce before sellers re-engaged with force. The positive overlapping signals that had briefly appeared on momentum indicators have been completely overwhelmed by the fundamental backdrop.
Key support: The 1.1575 area is being tested right now and represents the next critical floor. Below that, there is limited visible support until the 1.1500 psychological level, which would represent the lowest EUR/USD has traded since late 2024. A break below 1.1500 opens the door to a test of 1.1400 and potentially 1.1300 if the energy crisis deepens.
Key resistance: The 1.1670 level that served as the initial target support (now flipped to resistance) is the first barrier on any recovery attempt. Above there, 1.1750 represents the more significant ceiling — the EMA50 convergence zone. A daily close above 1.1750 would be needed to neutralize the immediate bearish bias, and that appears unlikely as long as the Iran conflict continues to escalate and European gas prices remain elevated.
EUR/USD is a sell at current levels, and the conviction behind that call is high. The combination of a widening energy crisis that disproportionately punishes Europe, a surging dollar fueled by safe-haven flows and hawkish Fed repricing, unwinding euro longs in the COT data, and a technical breakdown below the EMA50 creates a convergence of bearish signals across every analytical framework.
The near-term target is 1.1500. If the Strait of Hormuz remains blockaded and European gas prices stay elevated, 1.1400 becomes realistic within the next two weeks. The only catalyst that would reverse this call is a rapid ceasefire or a reopening of the Strait — and with Trump projecting four to five more weeks of military operations, that scenario appears distant.
For those already short: hold and trail stops above 1.1750. For those looking to enter: pullbacks toward 1.1640-1.1670 represent sell-the-rally opportunities as long as the conflict persists. The euro simply cannot rally in an environment where European gas prices have doubled in two days, the ECB is policy-paralyzed, and the dollar is absorbing every unit of global safe-haven demand.
The 2022 energy crisis pushed EUR/USD below parity. Nobody is calling for that outcome yet — but if the Strait of Hormuz remains shut for weeks and Qatar LNG stays offline, the echoes of that episode will grow louder. The euro is the most vulnerable major currency on the board right now, and the chart reflects it.
That’s TradingNEWS.com
