Extremely Overbought Conditions and Structural Resistance Indicate a Downward Correction.

In March, inflation pressures in the Eurozone showed a significant increase, with the main figure rising sharply to 2.5% year-on-year, up from 1.9% recorded in February. Although this acceleration aligns perfectly with our internal projections, the figure is slightly below the broader market consensus of 2.6%. Conversely, the underlying price movements remain more controlled; core inflation slowed to 2.3%, in line with our estimates but below the 2.4% anticipated by analysts.
Within the European Central Bank (ECB)—whose mandate is strictly based on price stability—policy makers' rhetoric has shifted toward a more restrictive stance. Even traditionally dovish members, such as Fabio Panetta, have begun emphasizing the importance of preventing second-round effects, particularly the risk of wage-price spirals. While Panetta maintains that any policy response should remain proportional, his characterization of "measures" as the baseline scenario indicates an increasing institutional openness to further interest rate hikes.
This sentiment is reinforced by Governing Council member Gabriel Makhlouf, who emphasized that the institution is ready to intervene once the economic impact of regional conflicts becomes clearer. Makhlouf warned that prolonged war could push the Eurozone economy toward a "bad scenario" modeled by the bank. For now, the ECB maintains a strategic neutral stance, neither confirming nor rejecting any specific policy direction.
However, a subtle yet profound shift in language is evident in communications following the March discussions. Unlike February, when the narrative indicated inflation was stable near the 2% target, the Council now emphasizes that they are "closely monitoring" systemic risks arising from geopolitical tensions. This linguistic nuance signals increased institutional caution and opens the door for a more aggressive policy shift toward tightening in upcoming sessions if rising inflation risks materialize.
In key Oval Office communications, U.S. President Donald Trump recently hinted at the potential end of regional hostilities, suggesting that the United States may "soon leave Iran." Trump outlined a tactical withdrawal schedule of about two to three weeks, emphasizing a commitment to exit regardless of the status of formal diplomatic agreements. Simultaneously, Iranian President Masoud Pezeshkian expressed "the necessary willingness" to end the conflict, though he remains firm on demanding strong security guarantees to ensure lasting peace.
This emerging diplomatic optimism coincides with a series of strong U.S. economic indicators. The ISM Manufacturing PMI rose to 52.7 in March, surpassing expectations and continuing its previous gains. Labor market data also provided a positive surprise, with the ADP Employment Change report showing an addition of 62,000 jobs, significantly above the forecast of 40,000. Furthermore, consumer resilience was demonstrated by a 0.6% jump in February Retail Sales, marking a sharp rebound from the downwardly revised contraction in January.
According to CME FedWatch Tool, these data have led markets to expect a relatively stable policy period, with the Federal Reserve likely to keep interest rates in the 3.50%–3.75% range through 2026. However, if geopolitical tensions continue to ease and trigger a significant decline in global oil prices, expectations for a shift toward monetary easing could quickly re-emerge.
Extremely Overbought Conditions and Structural Resistance Indicate a Downward Correction_1
Technical Analysis
From a technical perspective, EUR/USD has recently made a strong bullish impulse, reaching a critical resistance level at 1.1625. This level has significant historical importance, as it was the starting point of a sharp bearish move on March 24 that ultimately drove the pair down to 1.1443 by the end of the month. Repeated rejections at this level are likely to trigger a major corrective impulse toward the Fibonacci retracement level 0.50 at 1.1534.
This downward target is supported by a cluster of closely aligned indicators. Specifically, the 100 and 200-period Moving Averages (MA) are currently at 1.1521 and 1.1548. Their alignment within this narrow support zone adds substantial structural weight to the thesis of a corrective move toward that level.
Our analysis of momentum oscillators strongly supports the possibility of a tactical reversal. The RSI has reached 75, moving well into overbought territory and indicating that the recent rally is technically overextended.
Although the MACD currently shows a bearish histogram crossover, it is important to note that the signal line remains above the neutral threshold. This configuration suggests that the upcoming downward move should be characterized as a technical correction rather than a full trend reversal. Traders should closely monitor the 1.1534 zone for signs of renewed buying interest.

Trading Recommendations

Trade Direction: Sell
Entry Price: 1.1613
Target Price: 1.1534
Stop Loss: 1.1660
Valid Until: April 10, 2026 15:00:00

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