EUR/USD Price Forecast: Middle East crisis escalates, panic dominates financial markets

EUR/USD Current price: 1.1613

• The Middle East crisis spreads throughout the Persian Gulf, affecting the Strait of Hormuz.
• The Eurozone inflation unexpectedly rose in February, nearing 2% on a yearly basis.
• EUR/USD bearish momentum continues as demand for safe-haven US Dollar persists.

The EUR/USD pair pierced the 1.1600 mark on Tuesday, as risk aversion keeps fueling demand for the US Dollar (USD). The escalation of the Middle East crisis has finally interrupted traffic through the Strait of Hormuz, with the immediate consequence of soaring Oil prices. The barrel of West Texas Intermediate (WTI) crude traded as high as $77 per barrel, levels not seen since last December.

The Iran war, spread throughout the Persian Gulf, is becoming a global disruptive event. Indeed, the immediate reaction could be higher oil prices and demand for the safe-haven USD, but that’s just the tip of the iceberg. Inflation is likely to become a concern in the upcoming weeks, although the market won’t know the extent of the impact until April, when March figures are expected to be reported.

Central banks from around the world are taking different monetary policy approaches, albeit most of them are still in a paused, loosening cycle. Mounting inflationary pressures could force a sudden course change, with the odds of rate hikes rising as the chaos spreads.

Near-term, EU inflation surprised market participants: The preliminary estimate of the annual Harmonized Index of Consumer Prices (HICP) rose to 1.9% in February, up from 1.7% in January. While still within the European Central Bank (ECB) goal, the unexpected uptick added to the market’s dismal mood.

The American session will bring no relevant data, but speeches from ECB and Federal Reserve (Fed) officials. Comments about how the war could impact their policy could trigger market movements.

EUR/USD short-term technical outlook

In the daily chart, EUR/USD trades with a mildly bearish bias, as spot has slipped below the 20-day Simple Moving Average (SMA) near 1.1800 and met sellers around the 100-day SMA in the 1.1700 area, while the 200-day SMA continues to edge higher beneath both, yet above the current level. The Relative Strength Index (RSI) indicator has dropped toward 32, approaching oversold territory and signaling persistent selling pressure, while the Momentum indicator remains negative and extends lower, reinforcing downside control despite the maturing nature of the move.

Initial resistance emerges at the 1.1690–1.1700 area, where the latest swing high aligns with the 100-day SMA, followed by 1.1800, which coincides with the descending 20-day SMA and marks a pivotal cap for any corrective rebound. On the downside, immediate support is located at 1.1600, with a clear break exposing 1.1550 and then 1.1500.

In the 4-hour chart, EUR/USD is bearish as the pair holds below the clustered 20-, 100- and 200-period Simple Moving Averages (SMAs), which now align as a descending cap between 1.1750 and 1.1820. Price has broken decisively beneath the longer-term averages, indicating that sellers control the tone despite the longer SMAs remaining relatively flat. The Momentum indicator sits well below 0 and remains stretched to the downside, while the RSI lingers in the low 20s, indicating oversold conditions but not yet signaling a convincing rebound.

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