EUR/USD Price Forecast: Fear boosts demand for the US Dollar

EUR/USD Current price: 1.1718

• Middle East war keeps investors on their toes, fuels demand for safety.
• The EU manufacturing sector posted a strong expansion in February.
• EUR/USD bearish momentum set to expand in the near term.

The EUR/USD pair plunged towards 1.1700 on Monday, as risk aversion took over financial markets following weekend headlines. On Saturday, the United States (US) and Israel launched a massive attack on Iran, killing the  Islamic Supreme Leader Ayatollah Ali Khamenei. Tehran responded with retaliatory strikes, hitting US bases in different Gulf countries, including the United Arab Emirates, Qatar, Kuwait, and Saudi Arabia.

Middle East tensions resulted in skyrocketing Oil prices, amid fears of supply disruptions. It also boosted demand for the safe-haven US Dollar (USD), which trades with a firmer tone across the FX board.

Meanwhile, the Hamburg Commercial Bank released the final estimates of the February Purchasing Managers’ Indexes (PMIs) with a surprising improvement in European manufacturing data. The German Manufacturing PMI was confirmed at 50.9 following the preliminary estimate of 50.7, back into expansion territory for the first time in over three-and-a-half years, according to the official report. The EU manufacturing index recorded its strongest month in almost four years in the same month, as a fresh rise in new orders drove a sharper expansion in factory production.  

Meanwhile, back-and-forth strikes in the Middle East continue, keeping investors on their toes and markets in risk-off mode. Global stocks trade in the red, while demand for safety maintains Gold and Silver running north.

The American session will bring the US S&P Global and the ISM Manufacturing PMIs, the latter foreseen at 51.2. Other than that, investors will be looking for headlines coming from the Middle East for direction.

EUR/USD short-term technical outlook

In the 4-hour chart, EUR/USD trades at 1.1719, not far from an intraday low at 1.1698. The near-term bias turns bearish as the pair slips below the clustered 20- and 200-period Simple Moving Averages (SMAs), while the 100-period SMA caps higher, signaling a weakening medium-term tone. Meanwhile, the Momentum indicator has dropped below its midline and extended lower, reinforcing the downside pressure after the recent rejection near 1.1820. Finally, the Relative Strength Index (RSI) indicators holds in the low-30s after briefly dipping below 30, showing bearish momentum still in place despite an initial oversold signal.

In the daily chart, EUR/USD is poised to extend its decline. The pair trades well below a mildly bearish 20-day SMA near 1.1820, indicating sellers are gaining the upper hand after failing to sustain gains above recent highs. The pair still holds above the clustered 100- and 200-day SMAs around 1.1700, so the broader trend context remains underpinned, but short-term pressure is to the downside. Momentum trades below 0 and extends its decline, signaling strengthening bearish speed, while the RSI retreats toward 40, reinforcing the notion of building selling pressure rather than oversold conditions.

Immediate resistance emerges at the 1.1780/1.1800 area, where the 20-period SMA in the 4-hour chart and recent congestion converge, followed by the 1.1820/1.1830 band aligned with the 100-period SMA. A recovery above that upper barrier would be needed to ease selling pressure and open the way toward 1.1860. On the downside, initial support sits at the recent intraday low near 1.1698, ahead of 1.1650.

(The technical analysis of this story was written with the help of an AI tool.)