Euro plunges then stabilizes at the bottom; two weeks of narrow fluctuations hint at an impending trend reversal?

The 汇通财经 APP reports that after a sharp sell-off from above 1.2000 to below 1.1500, the euro against the US dollar has exhibited an almost eerie calm and consolidation over the past two weeks. Currently, the currency pair shows a clear tug-of-war between bulls and bears, with the ongoing fallout from the Middle East conflict remaining a significant external factor influencing the euro’s movement. On Friday (March 27), during the Asian session, the euro traded in a narrow range around 1.1535. As tensions in the Middle East escalated, the US dollar’s strength quickly returned, pushing the euro from an overbought state at the end of January to an oversold state by mid-March. In the short term, chasing extreme trends is challenging, and the market has recovered somewhat from the oversold area, with both bulls and bears having reasonable trading logic.

Euro to US Dollar Technical Analysis

From the weekly chart, the consolidation over the past two weeks can be seen as a temporary pause in a broader bearish trend. If one is optimistic about a stronger dollar or a weaker euro, the weekly perspective remains the main reference framework.

(The Euro to US Dollar Weekly Chart, Source: 易汇通) For euro bulls or dollar bears, the short-term chart is more attractive. The 4-hour chart shows that over the past two weeks, the euro has formed higher lows and higher highs near the lows, reflecting a mild bottoming characteristic. Although this trend still appears weak on the long-term chart, most trend reversals often begin with similar slow bottoming patterns, akin to the situation in early February when the euro briefly formed higher lows before being broken by bears.

On the upside, the current level of 1.1655 remains a crucial dividing line for bullish momentum. A valid breakout would open space towards 1.1750 and 1.1766.

On the downside, the psychological barrier of 1.1500 has received effective defense this week, with short-term support forming around 1.1525.

(The Euro to US Dollar 4-Hour Chart, Source: 易汇通)

Impact of the Middle East Conflict on the Euro

The ongoing uncertainty surrounding the Middle East conflict remains a key external variable affecting the euro’s movement. When tensions escalate, the dollar often strengthens quickly as a safe-haven currency, putting pressure on the euro; conversely, if the situation eases or diplomatic negotiations make progress, it may relieve the pressure from a strong dollar and provide the euro with rebound space.

Current market concerns regarding the protraction of the conflict remain, but signals of negotiation from the Trump administration also present possibilities for a short-term risk appetite recovery. Traders need to flexibly adjust their positions in conjunction with geopolitical dynamics.

Market Outlook and Risks

In the short term, the euro against the US dollar is still in a bottoming consolidation phase, with significant divergence between bulls and bears. Euro bulls can look for breakout opportunities above 1.1655, while bears should be wary of the effectiveness of support at 1.1500. Any developments in the Middle East situation could quickly alter market risk appetite.

From a medium to long-term perspective, if there is substantial easing in the Middle East conflict or breakthroughs in diplomatic negotiations, the euro may experience a corrective rebound; conversely, if the conflict becomes prolonged or escalates anew, the strength of the dollar will continue to suppress the euro. Traders should flexibly adjust strategies based on time frames, risk preferences, and geopolitical dynamics, strictly controlling position risks.

As of 9:50 AM Beijing time, the euro is trading at 1.1537/38 against the US dollar.

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责任编辑：郭建