EUR/USD Price Forecast: Euro Tumbles Toward 1.1700 as Middle East “War Premium” and Weak German Sales Hammer Sentiment
The Euro is under pressure from both weak economic data at home and global geopolitical concerns. During the European session...
Quick overview
- The Euro is facing pressure due to weak economic data and geopolitical tensions, with EUR/USD dropping to a low of 1.1698.
- A significant escalation in the Middle East, particularly the death of Iran's Supreme Leader, has led investors to favor the U.S. Dollar as a safe haven.
- German retail sales have declined sharply, while manufacturing shows some resilience, creating mixed signals for the Eurozone economy.
- Analysts recommend selling the Euro on minor rallies, with a bearish outlook driven by energy supply risks and a hawkish Federal Reserve.
The Euro is under pressure from both weak economic data at home and global geopolitical concerns. During the European session on Monday, March 2, 2026, EUR/USD fell to a low of 1.1698 and is now trying to hold near 1.1740.
The combination of a “decapitation strike” in Iran and a staggering miss in German consumer spending has triggered a violent “risk-off” rotation, sending investors fleeing into the safety of the U.S. Dollar.
The “Khamenei Factor”: Geopolitics Drive Dollar Dominance
The main reason for the 1% drop in the pair is the sharp escalation in the Middle East. After coordinated U.S. and Israeli military strikes over the weekend that reportedly killed Iran’s Supreme Leader Ayatollah Ali Khamenei, the U.S. Dollar has become the top safe haven for investors.
- “Ahead of Schedule”: President Trump confirmed that operations in Iran are moving faster than expected, signaling to markets that this is likely a sustained military campaign, not just a single event.
- Energy Insecurity: With possible disruptions in the Strait of Hormuz, Europe’s reliance on energy imports makes its economy more vulnerable than the U.S., which is more energy independent. This risk is causing investors to move money from the Euro to the U.S. Dollar.
German Retail Slump vs. Manufacturing Resilience
Domestically, the Eurozone’s largest economy is sending mixed signals that are ultimately failing to support the currency.
- The Retail Shock: German retail sales for January fell by 0.9% month-over-month, much worse than the expected 0.2% drop. Yearly growth slowed to 1.2%, showing that German consumers are spending less due to higher tariffs and uncertainty in the region.
- Manufacturing Silver Lining: In a rare bit of positive news, the HCOB Germany Manufacturing PMI rose to 50.9 in February, its highest level in 44 months. While this shows the industrial sector is finally peeking into expansion territory, the “war premium” on energy prices threatens to nip this recovery in the bud.
Fed Policy: The “Inflation Pass-Through” Barrier
In the U.S., the Dollar is also getting support from rising expectations that interest rates will stay high.
- Tariff Inflation: Recent data shows that U.S. companies are passing tariff costs on to consumers. This higher inflation makes it less likely that the Federal Reserve will cut rates in March.
- Miran’s Dovish Dissent: Fed Governor Stephen Miran suggested that large rate cuts could still happen if inflation pressures stay low. However, markets expect rates to stay high for now, at least until new data from the February ISM Manufacturing PMI and Employment Index is released later today.
Technical Analysis: EUR/USD Breaks 1.1760 Trendline
Looking at the 2-hour chart, the Euro has dropped sharply. The pair has fallen below the 1.1760 trendline support, which had supported the recovery in late February.
- The 50-EMA has now crossed below the 100-EMA on the short-term chart, which is a bearish signal.
- The RSI has dropped to 38, showing strong selling pressure. It is not yet in oversold territory, so there could be more downside before a rebound.
- Downside Targets: With $1.1703 acting as the immediate floor, a failure here opens the path to $1.1671 and the major psychological support at $1.1640.
Key Trading Levels to Watch
- Immediate Resistance: $1.1760 — The old trendline support; must be reclaimed to stop the bleeding.
- Pivot Zone: $1.1730 — Today’s current battleground for intraday control.
- Critical Support: $1.1703 — The intra-day low; a breach here targets $1.1670.
- Bearish Invalidation: $1.1790 — A move above this level would suggest the “war scare” is being priced out.
The Analyst’s Verdict: Sell the Rallies
As a professional analyst, I believe this is a time to favor the U.S. Dollar. Energy supply risks in Europe and a hawkish Federal Reserve create a strong bearish outlook for the Euro. Unless there is clear progress toward peace in the Middle East, EUR/USD is likely to keep moving lower.
Trade Idea: Look for selling opportunities on minor relief rallies. Sell below $1.1730 targeting $1.1670.
Stop Loss: Place above $1.1790.
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