EUR/USD forecast: Trump loses grip on markets amid re-escalation of tensions | Forex Friday

Risk sentiment remained downbeat in the first half of Friday’s session, as the drop in oil prices proved to be short-lived after Trump extended the pause in planned strikes on Iran’s energy plants. Crude oil prices climbed a further 4% to extend its surge as fighting continues. The likes of the German DAX index fell sharply along with US index futures as risk appetite soured. Against this backdrop, our EUR/USD forecast remains tilted to the downside as the impact of the war is likely to weigh heavily on economies of energy importers.

 

Trump loses grip

 

Trump appears to be losing his grip on the markets. Investors no longer seem to take his statements at face value—if anything, they’re beginning to trade against them, waiting for tangible proof before reacting. That’s an uncomfortable position for any policymaker to be in. It doesn’t help that Israel reported new air strikes on Tehran and Isfahan, while Iran announced a fresh wave of missile strikes against Israel.

 

 

But going back to the point of TACO becoming ineffective, oil prices fell by roughly $4.50 a barrel yesterday following Trump’s latest post about extending the pause on planned strikes against Iran’s energy infrastructure. But the move was notably more muted than Monday’s sharp sell-off in oil and rally in equities, and it was unwound far more quickly. The oil market, in particular, seems to be growing increasingly desensitised to the rhetoric.

 

Looking at the broader market reaction, the extension may reduce the immediate risk of tit-for-tat escalation, but several underlying concerns remain firmly in place. First, it does nothing to resolve the issue of the Strait potentially being closed—now perhaps prolonged by another ten days—with the knock-on effect of storage capacity filling up across the Gulf and the risk of lasting damage to oil wells from extended shut-ins.

 

Second, there remains the risk of Iran targeting GCC energy infrastructure in retaliation given that Israel has continued striking Iranian domestic energy assets this week regardless of Trump’s stance.

 

All told, markets appear to be placing less weight on White House jawboning and focusing more on the underlying supply risks. This should mean continued dollar strength, keeping the EUR/USD forecast tilted to the downside.

 

US non-farm payrolls could be a damp squib next week

 

We will have plenty of US data next week, but will they matter? The NFP data will be released on Friday, April 3. Last month’s surprise -92K print came as a shocker but it didn’t matter for the dollar as the oil shock kept the greenback supported against all major currencies. Anther bleak number could raise stagflation alarm bells and hurt US stocks, but truth be told not many people are watching data closely right now as the focus remains firmly fixated on the Middle East and oil prices.

 

Technical EUR/USD forecast and key levels to watch

 

From a technical perspective, the bias for EUR/USD forecast remains to the downside, given the recent lower highs that have been printed on the chart. Additionally, we’ve broken below several key technical levels, including the 1.1580 level, which was the low from January.

 

 

That level has been tested in recent trading, and while price attempted to break back above it, it has so far remained below. As long as we stay under this level, the broader resistance continues to point to the downside.

 

There is also a bearish trendline in place that has been holding, and this would need to break before we could turn more positive on the EUR/USD outlook.

 

The key level to watch today is the 1.1500 handle, which is both a psychologically important level and an area of price support. We briefly broke below this level during the height of the sell-off in early March, but in recent times prices have attempted to stabilise above it, and so far, it is still holding above 1.1500.

 

However, if we see a decisive break back below 1.1500, that could pave the way for fresh technical selling towards the 1.1400 handle initially, targeting the August 2025 low of 1.1391. Beyond that, round-number levels such as 1.1300 and 1.1200 would come into focus for further downside extension.

 

Watch: Trump losing grip on markets | Crude, S&P and Gold analysis

 

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R