EurUsd Weekly Outlook, March 2, 2026: War Returns

• The United States, still grappling with tariff uncertainty, is now trying to determine the direction of policy under both Trump and the Federal Reserve. For the Fed, recent macroeconomic data argue against cutting rates before summer. Meanwhile, the geopolitical backdrop has darkened following the joint Israeli-American strike in Iran. Oil prices are soaring.
• Europe appears to be glimpsing the first signs of an economic recovery, particularly in Germany, suggesting that the European Central Bank may adopt a less dovish stance on rates.
• EurUsd remains unable to move decisively away from the red resistance zone just above 1.19. A less dovish Fed has so far failed to pull the greenback meaningfully away from its recent lows.

The Economy Holds Up, the Fed Stands Pat

The tariff chaos triggered by the U.S. Supreme Court ruling has not helped the dollar, whose recovery stalled just below 1.17. Europe would hardly emerge unscathed from a scenario that could see tariffs raised by 10%—possibly even 15%—for six months on all goods entering the U.S. Yet the issue extends beyond duties: several trade agreements are now at serious risk of failing ratification. Legal challenges could further entangle customs procedures in bureaucratic gridlock.

President Trump’s State of the Union address offered little in terms of new direction, as attention gradually shifts toward the upcoming midterm elections. In the background, tensions with Iran remain acute following Israel’s strike on Tehran, while the war between Ukraine and Russia enters its fourth year with no sign of de-escalation.

The joint Israel-U.S. operation that decapitated Iran’s political-religious leadership triggered a swift military response from Tehran, including attacks on military and civilian infrastructure across the Gulf. Oil prices spiked sharply after tanker routes in the region were disrupted.

U.S. macroeconomic data, meanwhile, reinforce the case against immediate rate cuts. Consumer confidence has exceeded expectations, and the labor market remains resilient—conditions that risk reigniting inflation above the 2% target. For now, markets are pricing in no change in rates until at least June. Any shift in borrowing costs may ultimately fall to Powell’s successor.

Elsewhere, inflation is showing signs of revival in countries such as Australia and Norway, making rate cuts less pressing. Europe presents a different picture: inflation has returned to target, yet macro data—especially from Germany—hint at a more robust recovery ahead.

Japan stands apart. There, politics is increasingly influencing monetary policy. Prime Minister Takaichi, fresh from victory in snap elections, has appointed two decidedly dovish members to the Bank of Japan’s board. The yen has weakened once again.

EurUsd: The Red Zone Still Looms

The stalemate in EurUsd is evident. After the sharp rally of recent months, momentum has moderated significantly. The pair is treading carefully, reluctant to break above resistance or fall below critical support levels—currently 1.19 and 1.15.

Attempts to push higher have been swiftly rejected, as have moves lower. The upward-sloping distribution channel now frames 1.16 and 1.21 as the lower and upper boundaries to watch. Only a decisive breakout from this range is likely to restore directional clarity.

The flare-up in Middle Eastern tensions has favored the dollar, which opened the week by pushing EurUsd back below 1.18.

One of the more intriguing aspects of the current phase lies in cyclical analysis. According to historical patterns, EurUsd should have reached a turning point last summer—presumably a peak.

History teaches that cycles allow for some flexibility in timing. If that remains true, the recent rally may be nearing exhaustion. Alternatively, the cycle that has tracked the pair with striking precision since the 2008 financial crisis may simply have lost its relevance.

Either way, the dollar is now called upon to respond. Should it fail to do so, weakness in the greenback could intensify in the months ahead.