Key takeaways
Recovery after sharp decline: The EUR/USD rebounded from a four-month low of 1.1507 after earlier falling 4.8% from its 2026 high, as the euro stabilized following a sharp pullback in oil prices triggered by the International Energy Agency proposal for a large, coordinated oil stockpile release.
Macro drivers turning supportive: Expectations of a more hawkish stance from the European Central Bank and widening Eurozone–US Treasury yield spreads are improving the euro’s outlook, with upcoming US CPI data seen as a key catalyst for further moves.
Technical bullish reversal setup: The pair is forming a minor inverse head-and-shoulders pattern, with 1.1673 as the upside trigger. A break above it could push prices toward 1.1740–1.1774, while a drop below 1.1565 would invalidate the bullish scenario.
The EUR/USD has declined by 4.8% from its current year-to-date high of 1.2083 on 27 January 2026 to hit a four-month low of 1.1507 on Monday, 9 March 2026, on the onset of escalating Middle East tensions due to the US-Iran war that drives a safe-haven demand for the US dollar.
After the dramatic reversal of oil prices on Monday, where the West Texas crude oil tumbled by 35% from $119.54/barrel, a 4-year high, to trade below $90 as it printed an intraday low of $76.83/barrel on Tuesday, 10 March 2026, as the International Energy Agency proposed a significant historical coordinated stockpile release of more than 182 million barrels of oil.
The energy-vulnerable euro has managed to find a footing as the EUR/USD attempted to recover to trade higher now at 1.1603 at the time of writing from Monday’s low of 1.1507.
Meanwhile, the ongoing US-Iran war does not seem to be showing signs of abating as it entered its 12th day.
On the monetary policy front, expectations have also shifted in a more hawkish direction for the European Central Bank (ECB). The Eurozone’s short-term interest rate swaps market has now implied a 40% chance of a 25-basis-point interest rate hike by the ECB by June this year, where the ECB has held its policy deposit rate steady since June 2025.
Widening Eurozone sovereign bond/US Treasury yield spreads support a recovery in EUR/USD
Fig. 1: 2-year & 10-year Eurozone sovereign bond/US Treasury yield spreads as of 11 Mar 2026 (Source: TradingView)
Interestingly, the 2-year and 10-year Eurozone sovereign bond/US Treasury yield spreads have staged major bullish breakouts to trade at -1.25% and -1.27% respectively at this time of writing, in line with the recent uptick in the Eurozone’s preliminary core inflation rate for February that inched higher to 2.4% year-on-year from January’s print of 2.2% (see Fig. 1).
A further widening of the 2-year and 10-year Eurozone sovereign bond/US Treasury yield spreads may allow the EUR/USD to stage a further recovery, and the key risk event that is likely to trigger such a movement will be today’s release of US CPI data for February.
Let’s now decipher the short-term trajectory (1 to 3 days) of the EUR/USD from a technical analysis perspective.
EUR/USD – Tracing out a minor bullish “Inverse Head & Shoulders” configuration
Fig. 2: EUR/USD minor trend as of 11 Mar 2026 (Source: TradingView)
Watch the 1.1565 key short-term pivotal support on the EUR/USD, and a clearance above the 1.1673 neckline resistance (upside trigger level) of the minor “Inverse Head & Shoulders” may see a potential push up towards the next intermediate resistance at 1.1740/1774 (also the 20-day and 50-day moving averages). Above 1.1774 may see further strength towards 1.1830 (see Fig. 2).
On the flip side, a break and an hourly close below 1.1565 negates the bullish tone for a retest on the next intermediate support at 1.1495/1470.
Key elements to support the bullish bias on EUR/USD
- Since the start of March 2026, the EUR/USD’s earlier corrective decline has started to stabilize at the 1.1495/1470 support zone via the formation of a minor bullish reversal “Inverse Head & Shoulders” configuration.
- The hourly RSI momentum indicator has just retested and staged a rebound from its ascending support at the 36 level.
