Facts
- EURUSD (D1 timeframe): the pair has fallen below the 1.150 level and remains under pressure due to dollar strength.
- Rising oil prices are boosting global inflation expectations, strengthening the USD.
- The Fed kept rates at 3.50%–3.75%, but the message was slightly hawkish, with higher inflation projections.
Recommendation
Position: Short EURUSD at market price
- Take Profit (TP1): 1.135
- Take Profit (TP2): 1.125
Stop Loss: 1.160
Source: xStation5
Opinion
The escalation of the conflict in the Middle East has significantly altered the macro environment for EURUSD, primarily through the energy channel. The euro area remains structurally more sensitive to rising oil prices than the US, increasing the risk of stagflation — a combination of higher inflation and weaker economic growth.
Although the ECB is likely to shift toward a more hawkish narrative, emphasizing the need to avoid a repeat of the 2022 energy shock, its actions are constrained by weak growth dynamics. In contrast, the Federal Reserve operates in a relatively stronger economic environment and maintains a slightly hawkish stance — particularly in the context of rising inflation risks.
This divergence supports the dollar in the short term. Additionally, the market is increasingly questioning the timing of future rate cuts in the US, while in Europe, expectations for tightening are driven mainly by inflation concerns rather than economic strength — which is a less favorable setup for the euro.
The technical break below the 1.150 level reinforces bearish momentum, and despite approaching oversold conditions, there are still no clear signals of a trend reversal. The main risk to this scenario would be a rapid de-escalation of the conflict in the Middle East or a sharp decline in oil prices.
