Euro EURUSD faces triple jeopardy: Non-farm payrolls surge + energy prices soar + war escalation! (407) April 7, 2026 Technical Analysis

（Source: Lingsheng Optivest）

Fundamentals Summary:

1. U.S. Nonfarm Payrolls in March rebounded above expectations, hitting a one-year high:

On Friday, the U.S. Bureau of Labor Statistics released data showing that in March, nonfarm payroll employment increased by 178k, far above economists’ expectations in the Bloomberg survey of 65k. This was the largest month-over-month gain since the end of 2024. In February, employment fell by 92k, revised to a decline of 133k. Notably, total nonfarm payroll employment for January and February combined was revised down by 7k, with the base for the first two months adjusted slightly lower. Meanwhile, the unemployment rate fell to 4.3% in March, below the expected 4.4% and also better than the prior reading of 4.4%. In March, average hourly earnings rose 0.2% month-over-month, below the market expectation of 0.3% and also below February’s 0.4%; year-over-year, they rose 3.5%, the lowest level in nearly three years and also below the market expectation of 3.7%.

The U.S. job market strongly rebounded in March, far exceeding market expectations. However, the shock from the Iran war has not yet been fully reflected in the data, and deep structural concerns in the labor market remain. At the same time, amid geopolitical tensions driving the situation, the reference value of the March report for assessing the Iran war shock is limited. A rapid rise in energy prices triggered by the situation in the Middle East is reinforcing the Fed’s vigilance toward inflation risks.

The sharp rebound in March employment data was already foreshadowed. The unexpected decline in February employment was mainly due to a double drag: a strike by more than 30k Kaiser Permanente medical workers in California and Hawaii, and harsh winter weather. As those strike events were resolved in March, employment in the healthcare sector rebounded significantly, becoming the largest source of employment growth that month. Employment in the construction industry and in the leisure and hospitality sector also followed suit with the rebound. Market participants generally believe this, to some extent, reflects seasonal repair effects brought by improving weather.

Looking at the details, in March the healthcare industry added 76k jobs, far above the average of 29k added over the past 12 months. Of this, doctors’ offices added 35k jobs, mainly reflecting workers returning after the strike ended; hospitals added 15k jobs. In the healthcare and social assistance sector, in recent months it has nearly shouldered the burden of supporting the overall labor market on its own. Over the 12 months through this year’s February, the sector added about 700k jobs in total. Excluding this sector, the rest of the economy net decreased by about 500k jobs over the same period. Construction added 26k jobs, transportation and warehousing added 21k jobs; the latter was mainly driven by the courier and messenger industry, which contributed about 20k of those additions. Social assistance continued its upward trend, adding 14k jobs. Federal government employment continued to contract, losing 18k jobs in March. Since the peak in October 2024, federal government employment has cumulatively fallen by 355k, a decline of 11.8%. Employment in the financial activities industry decreased slightly by 15k jobs, and has cumulatively fallen by 77k jobs since the May 2025 peak.

Despite the impressive data, analysts have cautioned that the March report has limited reference value for assessing the impact of the Iran war shock. The Department of Labor’s data collection point was around mid-March; at that time, the war had broken out only about two weeks prior. In addition, many firms typically set hiring plans months in advance, so the war’s substantive impact on the labor market is expected to gradually show up in subsequent monthly data. The rapid rise in energy prices driven by the Middle East situation is reinforcing the Fed’s alertness to inflation risks. Strong employment data will further solidify the Fed’s stance in the current phase: prioritizing bringing inflation under control while maintaining policy resolve.

Meanwhile, even though the unemployment rate remains low, the overall labor market still shows a stagnant state of “low hiring, low layoffs.” Those currently employed have a degree of job security, but job seekers often face a “too few jobs, too many applicants” dilemma. Laura Ullrich, Director of Economic Research at the jobs website Indeed, said: “If you’re looking for a job in business, finance, or tech right now, it’s really very difficult to find a job.”

The decline in the unemployment rate also has structural factors worth noting. Household survey data shows that the actual number of employed people declined somewhat, but the number of people in the private labor force fell significantly by about 400k over the same period, from 170.48 million to 170.09 million, jointly pushing the unemployment rate downward. At the same time, the labor force participation rate fell to a five-year low.

Even as employment growth slows, the unemployment rate can remain low for another important reason: the Trump administration tightening immigration policy has contracted labor supply. A reduction in supply means employers do not need to create as many jobs as before to keep the unemployment rate stable.

Analysts noted that the Trump administration’s immigration control policies have significantly narrowed labor supply. This means the “break-even” employment incremental growth needed to keep the unemployment rate stable has fallen substantially. But there is broad market consensus: during the Trump administration, that threshold has been pushed down significantly.

2. U.S. March ISM Services Index falls to 54; prices-paid index hits highest since October 2022:

The U.S. ISM non-manufacturing index in March came in at 54. Although it has remained in expansion territory for 21 consecutive months, it missed the market expectation of 54.9 and fell noticeably from the prior reading of 56.1. On the surface, services are still expanding, but structural divergence has intensified, with a clear crack appearing in economic momentum.

The subcomponent data reflects the “three-way divergence” among growth, inflation, and employment, presenting a typical “mixed bag” structure. New orders were strong. In March, the new orders index rose to 60.6, the highest level since February 2023, showing that demand still has resilience. Price pressure jumped significantly. The prices index surged to 70.7, the highest since October 2022. It has also been above 60 for 16 consecutive months, reflecting that inflation persistence remains strong. At the same time, employment suddenly weakened. The employment index fell to 45.2, entering contraction territory for the first time in four months, and also the lowest level since December 2023, making it the most evident “weak spot” in this report.

The business activity index fell sharply from 59.9 to 53.9, the lowest level since September 2025, indicating that services growth momentum has clearly cooled. At the same time, the supplier deliveries index rose to 56.2, implying slower deliveries, which is typically related to rising demand and supply-chain pressures. The inventories index fell to 54.8, but firms are still proactively rebuilding inventories to prepare for potential supply shocks. The backlogs index stayed in expansion territory but cooled somewhat, showing demand is still there, but the margin is weakening. Overall, the economy is still expanding, but the “pace is clearly slowing.”

The report showed that companies broadly mentioned the pressures brought by rising energy prices. Prices for gasoline and diesel increased, while commodity prices such as lumber, copper, and steel also rose. Firms are also increasing inventories proactively to deal with potential supply-chain disruptions. The main reasons include: tensions in the Middle East, especially involving Iran; disruptions to shipping and air transport; and winter weather affecting logistics. By contrast, tariff factors are still mentioned, but they are no longer the main contradiction—geopolitical shocks are becoming the dominant variable.

Over the past six months, the S&P Global and ISM services PMI trends have diverged markedly: the former has been weakening all along, while the latter has stayed elevated. However, this divergence began to converge in March. The S&P Global services PMI has fallen into contraction territory; the ISM services PMI also fell in tandem to 54. Analysts believe that the “re-alignment” of these two indicators suggests that the earlier resilience attributed to the ISM may have been overstated, and the true condition of services is gradually coming into view.

S&P Global Chief Economist Chris Williamson said, “The U.S. economy is facing dual pressures of rising prices and increasing uncertainty. The PMI survey data shows that the U.S. economy is under pressure from rising prices and worsening uncertainty. The Middle East war further amplifies the market’s concerns about other policy decisions in the near term, especially those related to tariffs.”

3. Trump says Iran’s ceasefire response is “not good enough,” reiterating that the deadline is 7 days:

On Monday, April 6, U.S. President Donald Trump responded to Iran’s reply to the ceasefire proposal put forward by the United States. Trump said Iran’s proposal is meaningful but “not good enough.” He also said that if it were up to him, he would “take the oil.” On Monday, at a White House event, Trump reiterated the point to the media regarding Iran, saying that April 7—this Tuesday—will be the final deadline for Iran to avoid U.S. attacks on the Isfahan power plant.

Trump said Tuesday is the final deadline, “unchangeable.” He added that Iran’s proposal is “very significant but still not good enough.” If they take the necessary action, the war could end very quickly. If Iran does not make concessions, then there will be no bridges or power stations. He reiterated that Iran cannot have nuclear weapons.

When asked whether 8:00 p.m. Eastern Time on Tuesday is the final deadline for Iran to reopen the Strait of Hormuz to commercial shipping, Trump answered, “Yes.” When asked what he would say to Americans who don’t want to see the U.S. go to war with Iran, Trump replied: “They’re stupid, because in the end this war is all about one thing: Iran must never have nuclear weapons.”

Also on Monday, U.S. media reported that informed officials said the U.S. and regional mediators are pushing for a 45-day ceasefire agreement in an effort to completely end the U.S.-Iran war, but the likelihood of reaching such an agreement is still “bleak.” U.S. media reported that a White House official said the 45-day ceasefire plan between the U.S. and Iran is just one of many options currently being discussed. The official said Trump has not approved the plan, and U.S. military actions against Iran are still ongoing.

April 7 is already the third time Trump has postponed the final deadline for strikes against Iran. On March 21, Trump had threatened that if Iran did not quickly reopen the Strait of Hormuz to commercial shipping, the U.S. would attack Iran’s power plants, setting a final deadline of 48 hours. On March 23, hours before that deadline expired, Trump cited that the U.S. and Iran had held “productive dialogue” and announced that the strike would be postponed by five days, moving to this Friday. On March 26, Trump posted on social media that Iran energy facilities would be delayed again by 10 days, postponing to 8:00 p.m. Eastern Time on April 6.

Last Sunday, April 5, Trump posted on social media: “8:00 p.m. on Tuesday, the 7th in Eastern Time.” Some media interpreted this as his latest postponement of the final deadline for an operation to destroy Iran’s energy facilities, pushing it by one day. In his post on social media last Sunday, Trump said: “April 7 will be the day of Iran’s power plants and bridges,” implying a fierce bombing of Iran’s power plants and bridges. In addition, in an interview with the media, he said that if Iran does not reach an agreement with the U.S. as soon as possible, he would order to “blow up everything” and “take over the oil.”

On Tuesday, April 7, market focus will be on the final release of the Eurozone services PMI price index at 4:00 p.m. to 4:30 p.m. Beijing time today, and the Eurozone investor confidence index survey report. Additionally, the U.S. will release durable goods orders data at 8:30 p.m. Beijing time today.

Economic News

EU warns: Do not let an energy crisis evolve into a fiscal crisis. As the Middle East conflict pushes energy prices higher again, the European Commission issued a clear warning to member states: do not turn an energy crisis into a new fiscal crisis. A European Commissioner for Economic Affairs said that over the past two years, European countries have spent hundreds of billions of euros on subsidies for households and businesses, including energy price caps, direct subsidies, and tax relief. These policies have cushioned the inflation shock in the short term, but have also significantly raised fiscal deficits and public debt levels.

The current new round of energy increases is forcing some countries to consider expanding spending again, but the EU emphasized that countries’ fiscal space has already narrowed noticeably. Continuing with “broad, non-discriminatory” subsidy policies would pose a substantial threat to fiscal sustainability. The EU’s core position is: future energy support measures must be more “targeted and precise,” concentrating resources on the most vulnerable households and key industries, rather than resorting to universal price interventions.

At the same time, EU fiscal rules are set to be tightened again. As the framework for fiscal discipline relaxed after the pandemic gradually returns, member states will face again constraints on deficits and debt ceilings. Bond yields for some high-debt countries have already moved upward, reflecting market concerns about fiscal prospects. There are also internal differences within the EU: Southern European countries tend to buffer shocks through fiscal measures, while Northern European countries with stronger fiscal discipline stress that budget constraints must be restored.

EU officials emphasized that more investment should be directed toward the energy system transition, such as renewable energy and infrastructure construction, rather than continuously subsidizing consumption-side prices. The core focus of future policy will shift from “blanket support” to “targeted intervention + fiscal constraints.”

ECB official: Monetary policy depends on the persistence of the energy shock. On Monday, a member of the ECB’s Executive Board and Governor of the Bank of Greece, Yannis Stournaras, said that appropriate monetary policy for the euro area will depend on the scale and nature of disruptions to energy supply caused by the Iran conflict. He said at an annual shareholders meeting in Athens that if the surge in energy prices proves to be temporary, the need to adjust monetary policy would be limited; but if price pressures become stronger and more persistent, affecting medium-term inflation expectations and wage developments, then the monetary policy stance would be tightened further.

Political News

Spain poll: Sanchez’s anti-war stance wins voter support; far-right Vox support rate falls. Two polls released on Monday show that Spanish Prime Minister Pedro Sánchez, who has firmly opposed the war launched by the U.S. and Israel against Iran, has seen his governing Socialists’ support rise. Meanwhile, the far-right party Vox that supports the war has seen its support fall.

Sánchez has become one of the most outspoken Western leaders critical of the war. He called it “illegal and reckless.” Spain has closed its airspace, banning U.S. aircraft involved in airstrikes from entering, and also prohibiting their use of joint U.S.-Spain military bases in southern Spain. This position sharply contrasts with the policies of U.S. President Donald Trump.

Poll details. According to a poll conducted by Sigma Dos for El Mundo, the Socialists’ support rose from 26.4% in February to 27.7%, narrowing the gap with the conservative People’s Party. Another poll conducted by 40dB for El País showed that Socialists’ support rose from 27.7% to 28.6%. At the same time, Vox fell from 18.3% to 17.1% in the Sigma Dos poll, and in the 40dB survey it dropped 0.1 percentage points to 18.7%. The People’s Party still leads with support of 32.5% and 31.1%, respectively, but the increase is less than one percentage point. The party accused Sánchez of damaging transatlantic relations, but avoided openly condemning Trump and Israel. Last month, a survey by Spain’s national polling organization CIS found that 85% of respondents in Spain oppose the war.

Political landscape and outlook. Polls show voter intent is moving away from extreme parties on the political spectrum toward the two main mainstream parties. The People’s Party is preventing votes from flowing to Vox, while the Socialists are winning over part of the previous voter base of the far-left governing coalition partner Sumar. However, fragmented voters mean a coalition government still needs to be formed; both polls show that if elections were held now, the right would win a majority. Spain’s next general election will be held in August 2027. Each survey’s sample size is about 2,000 people, with a margin of error of 2.2%.

Financial News

On Monday, European stock markets were closed for a holiday.

Geopolitical Developments

Trump issues final warning to Iran: If no deal is reached by Tuesday night, it will face “destruction.” On Monday at a White House press conference, U.S. President Donald Trump warned that Iran “can be wiped out overnight, and that night could be tomorrow night.” He demanded that Tehran reach a deal before Tuesday night (8:00 p.m. Eastern Time)—abandon nuclear weapons and reopen the Strait of Hormuz—otherwise it would face large-scale strikes on infrastructure such as power plants. Trump said Iran’s peace proposal is “significant but still not good enough,” and that the deadline is “highly unlikely” to be extended again.

The head of the Pentagon, Pete Hegseth, revealed that on Monday the U.S. carried out the largest airstrike since the start of the war. On Tuesday, the airstrike intensity would be increased further. Meanwhile, Trump and Hegseth detailed the successful process over the weekend of rescuing a downed pilot codenamed “44 Bravo.” CIA Director John Ratcliffe said the CIA misled the Iranian military through “deception operations,” ultimately rescuing the pilot who was hiding in a crevice in the mountains. Hegseth compared the operation to the resurrection of Jesus: “Downed on Friday, hiding in a cave on Saturday, rescued on Sunday, with the Easter morning sunrise sending him out of Iran.”

Iranian state media reported that Tehran has responded to the U.S. proposal through a mediator, Pakistan, and rejected a temporary ceasefire. It called for a permanent end to the war and proposed ten terms, including lifting sanctions, reconstruction, and setting up a safe passage agreement for the strait. An Iranian foreign ministry spokesperson said Iran’s demands “should not be interpreted as a signal of compromise.” Iran has effectively blocked the Strait of Hormuz, which accounts for about one-fifth of global oil and natural gas transport.

Israel expands military actions in Lebanon and Gaza. Israel’s strikes on Lebanon continue to escalate. On Sunday night, the Israeli Air Force bombed an apartment in Ain Saade, a Christian town in eastern Beirut, killing three people including Pierre Muaawad, a local official of the Lebanese Forces, and his wife. Israel’s military said the target was a “terror target,” and that Muaawad was “not a target.” The airstrike triggered strong anger among Christian political parties, which accused Hezbollah of dragging Lebanon into war. Israel has ordered residents of 40 villages in southern Lebanon to evacuate, and the evacuation order covers 15% of Lebanon’s territory. The conflict has resulted in nearly 1,500 deaths on the Lebanese side and more than one million people displaced.

In Gaza, at least 10 people were killed when Israel airstruck a school sheltering displaced Palestinians. Previously, clashes occurred between Palestinians and militia groups supported by Israel. Since the ceasefire in October last year, Israeli shelling has killed at least 700 people in Gaza. Hamas has refused to give up its weapons and has become the main obstacle to negotiations in Trump’s Gaza peace plan.

Russia and Ukraine launch large-scale mutual drone attacks. Russia said on Monday that drone attacks by Ukraine struck the Black Sea port of Novorossiysk, injuring at least eight people and damaging multiple residential buildings. The port is Russia’s largest export port on the Black Sea and the terminal of the Caspian Pipeline Consortium. Russian forces said they shot down 148 drones within three hours, and briefly cut power to nearly 500k households.

On the Ukrainian side, Russian forces carried out overnight drone attacks on Odesa. A 30-year-old mother and her 2-year-old daughter, as well as another woman, were killed; 16 people were injured; and about 16,700 households lost power. Ukrainian President Volodymyr Zelensky said that Russia fired 140 drones overnight, striking multiple energy facilities in several regions, and he again called for strengthened air defenses.

Syrskyi, commander-in-chief of Ukraine’s Armed Forces, said that since late January, Ukrainian forces have regained control of 480 square kilometers of territory in the southeast and east, including 8 settlements in the Dnipropetrovsk Oblast and 4 settlements in Zaporizhzhia Oblast. However, Russian forces are still advancing their spring offensive, trying to establish a “buffer zone” in Donetsk. Zelensky reiterated his offer of reciprocal ceasefire: if Russia stops attacks on energy infrastructure, Ukraine is also willing to ceasefire, but said Russia seems unwilling to agree to a ceasefire over Easter.

Technical Trading Strategy

Euro short-term price action—range outlook:

1.1570-1.1500

Technical indicator summary:

On Monday, April 6, due to the holiday closing of major financial markets, the euro’s short-term trading showed a typical “volatility compression” choppy environment, with prices moving in a narrow range around 1.1550. It is worth noting that during last Thursday’s session, as investor concerns about the Iran war ending quickly continued to rise, risk-avoidance sentiment significantly increased and directly pushed oil prices higher, while the U.S. dollar strengthened in parallel. In a nationally televised address on Wednesday night, President Trump explicitly stated that the U.S. would “strike Iran extremely aggressively over the next two or three weeks.” This statement sharply contrasts with the claim made the previous day that U.S. forces would withdraw from Iran over the next two or three weeks. This dramatic reversal completely shattered the market’s optimistic expectations that the conflict was about to end. At the same time, from a structural perspective, the dollar is receiving two strong supports: first, its traditional safe-haven status has been significantly amplified in a high geopolitical-risk environment; second, the advantage of the U.S. as a net oil exporter makes the dollar more resilient versus other major currencies in a high oil-price environment.

The latest data show that Brent crude has surged to 107.76 per barrel, up about 6.5% from the previous day; WTI also broke above the 106 per barrel level over the same period. This rise in oil prices directly reflects intensifying investor concerns about the security of energy channels, further reinforcing the dollar’s appeal. Trump’s shift in rhetoric not only extends the expected timeline for the conflict, but also—through resonance between energy prices and safe-haven logic—provides sustained short-term strength to the dollar. Investors are closely watching subsequent military developments and how the energy market responds. If conflict signals continue to strengthen, a linked rise in oil prices and the dollar is likely to further solidify. Driven by this core logic, after a strong rebound in the first two trading days, the euro was again severely hit. Since reaching a high around 1.1626 last week, the exchange rate has returned to the 1.1500 area.

Trump’s hardening stance on military action against Iran is reshaping the current risk-pricing framework for non-U.S. currencies and commodities through a dual mechanism of safe-haven sentiment and the advantage of net oil exporters. The combination effect of oil prices running at high levels and a strong dollar will continue to test global market stability until the conflict shows clear easing signals or substantial progress in energy supply recovery. In addition, data released by the U.S. Bureau of Labor Statistics on Friday showed that March nonfarm payrolls increased by 178k, far exceeding Bloomberg economists’ expectations of 65k, representing the largest month-over-month gain since late 2024. The March unemployment rate fell to 4.3%, below the expected 4.4% and also better than the prior reading of 4.4%. March average hourly earnings rose 0.2% month-over-month, below the market expectation of 0.3% and below February’s 0.4%; year-over-year growth was 3.5%, the lowest in nearly three years and also below the market expectation of 3.7%. At the same time, U.S. March ISM services PMI edged down slightly to 54, below expectations but still in expansion territory. The data structure is clearly divergent: new orders hit a new phase high, indicating demand remains resilient; but the prices-paid index rose to the highest since October 2022, signaling that inflation pressure has resurfaced.

The U.S. job market strongly rebounded in March, far exceeding market expectations, and together with the increased probability of inflation rising further, it further constrains the Fed’s rate-cut threshold within the year. Under the dual suppression of geopolitical factors and U.S. data, this has significantly compressed the euro’s near-term room for recovery. However, the shock from the Iran war has not yet been fully reflected in the data, and deep structural concerns in the job market remain.

On the other hand, according to data released by Eurostat, the euro area’s consumer prices rose 2.5% year-over-year in March, up sharply from 1.9% in February and the highest level since January 2025, also recording the largest month-over-month increase since 2022. With the Middle East conflict ongoing and the impact of elevated energy prices accelerating in Europe, multiple governments and central banks have cut their economic growth forecasts.

After the inflation data release, market expectations for the ECB raising rates two to three times within the year remained basically unchanged, with the first move potentially taking place as early as April. On Tuesday, Madis Müller, Governor of the Bank of Estonia, said that given the current situation, the baseline scenario set when locking in assumptions for March “could roughly be viewed as an optimistic scenario,” and he explicitly said, “If energy prices remain high for a long time, it is definitely possible that adjusting interest rates in April is not off the table.” However, although March inflation data was slightly below the Bloomberg survey median of 2.6%, core inflation unexpectedly slowed to 2.3%. Multiple ECB officials warned that the risk of further acceleration in inflation cannot be ignored and that the wage-price spiral must be closely watched and prevented.

The main driver of this round of price increases comes from energy costs, closely tied to the continued rise in international oil and gas prices after the outbreak of the Middle East conflict. Core inflation excluding volatile items such as food and energy unexpectedly fell back to 2.3%, below the prior value, and services prices also slowed. This divergence adds a more complex background for internal ECB policy discussions.

Bloomberg Economics analysts Simona Delle Chiaie and David Powell said the data above indicates that the March inflation impact caused by the surge in commodity prices in the ECB’s baseline scenario may have been “slightly overestimated,” which could provide grounds for dovish members of the committee to argue for holding rates unchanged in April.

Within the euro area, the March inflation trend shows significant divergence. Germany and Spain, which released data first, saw clear acceleration in inflation, with year-over-year increases of 2.8% and 3.3% respectively. France’s inflation rose somewhat but remained below 2%. Italy unexpectedly held steady at 1.5%, showing no signs of warming. Among them, Germany’s inflation rose to a level above one year, closely related to the war pushing up energy prices. Harmonized CPI year-over-year across most major economies in the EU rose, reflecting a broad-based price increase. Analysts expect overall euro-area inflation to rise further, continuing to pressure the ECB.

Given the reality that the ECB cannot directly intervene in energy-market volatility, the ECB has placed the focus of policy on preventing second-round effects—energy price increases translating into wage growth and other consumer price increases. The linked rise in fertilizer and food prices has also raised concerns at the ECB, because their changes would directly affect households’ inflation expectations. A survey released on Monday showed that consumers’ inflation expectations rose sharply in March, and businesses also expect to raise product prices significantly. At the market level, long-term inflation swaps jumped rapidly early in the war outbreak, then fell somewhat as pricing adjusted for expectations of rate hikes.

Several ECB officials have issued clearer signals. Peter Kazimir, Governor of the Slovak National Bank, said that the longer the Middle East conflict lasts and the more destructive it becomes, the greater the inflation risks—so a response must be made earlier and more decisively. Boris Vujcic, Governor of the Croatian National Bank, said inflation acceleration is “within expectations.” Fabio Panetta, Governor of the Bank of Italy, emphasized that inflation expectations must be closely monitored to prevent the wage-price spiral from forming, while ensuring that monetary policy actions remain appropriately sized. Persistent high oil and gas prices have put pressure on the ECB’s baseline forecast for this year’s inflation mean of 2.6%. According to stress-test calculations under extreme scenarios from the ECB, the peak increase in prices could reach 6.3% in 2027.

However, Nomura Securities analysts believe that although March inflation data is expected to rise significantly, this change will have limited influence on the ECB’s short-term policy decisions. Current market expectations are that inflation rising will be driven mainly by higher energy prices—especially the direct impact from continued increases in Brent crude under the backdrop of the Middle East conflict.

Nomura Securities analysts noted that the key for the ECB’s policy path is not any single month’s inflation data, but the persistence of the energy shock and its medium-term effects on the economy. Under the baseline scenario, the firm expects the ECB to keep interest rates steady until the fourth quarter of 2027. This judgment is based on assumptions that the Middle East situation will not lead to severe long-term damage to energy supply and that the economic impact of the energy price shock will gradually fade. Under this framework, the central bank would not need to tighten policy further. However, the risk scenario also cannot be ignored. If Brent crude prices remain above 95 per barrel continuously before the ECB’s June meeting, it could trigger a policy shift. The firm expects that in this case, the ECB might hike rates by 25 basis points in both June and September to deal with inflation pressure.

Overall, current ECB officials’ statements remain on the hawkish side, indicating that policymakers want to preserve flexibility. Some officials hint that there may still be rate hikes at the April meeting, but the market generally believes that whether this risk materializes depends on whether geopolitical conditions further escalate and whether energy prices continue to climb. Some market analysts said, “The ECB is deliberately maintaining policy uncertainty to avoid locking in a path too early, thereby preserving room to respond to different scenarios.”　　From the market reaction, rate-expectation positioning is diverging. On the one hand, some investors bet that inflation rising will drive more rate hikes. On the other hand, some argue that the energy shock will drag economic growth, limiting the space for policy tightening. This disagreement has increased volatility in both the euro and the bond markets.

Technical indicators show that on the 4-hour timeframe, the euro’s short-term price action is oscillating around the middle band of the Bollinger Bands. Meanwhile, the 4-hour RSI indicator has entered the 55-45 strength balance range, suggesting that the current price-rebalancing pattern and the relative equilibrium stage of forces between bulls and bears are synchronizing, while also implying that the exchange rate is facing a critical point in the bulls-versus-bears contest. The MACD momentum indicator is oscillating near the zero axis, indicating that near-term momentum is rather mild. This also further validates that bulls and bears are maintaining relative balance and that price has entered a new “calibration-reselection” window. Therefore, if the MACD momentum later can expand in volume while staying in positive value, it would provide a positive signal for the euro to re-enter a bullish repair structure. Conversely, if after the MACD momentum triggers and backtests below the zero axis it enters a volume-expansion phase, it would suggest that the bears’ momentum dominance could heat up, increasing the risk that the exchange rate will fall back and test downside targets. The Bollinger Bands upper band is currently around 1.1600, providing a dynamic resistance zone for the euro’s short-term price action. The Bollinger Bands middle band is currently around 1.1540, acting as the core dividing pivot for the relative balance between bulls and bears and for the strength/weakness structure. The Bollinger Bands lower band is currently around 1.1490, providing dynamic support. If the euro’s short-term price action confirms a return below the middle band, it should continue to guard against the risk of price being pulled by a “high-level pullback—lower-band test” pattern. Overall, the composite technical indicators reflect mild momentum and depict a technical picture where bulls and bears are relatively balanced. This aligns with the feature of “price recalibration after high positioning and volatility-pressure release.” Therefore, until key technical prices are broken, the subsequent technical structure is more biased toward upward with a mild rise in the price center of gravity; but if the exchange rate confirms a return below the middle band area, the risk that a backtest of the lower band may be amplified should be guarded against.

Technical structure indicates that on the 4-hour timeframe, the current euro price structure is around 1.1570, forming a near-term static resistance zone. If euro bulls expect a phased recovery that strengthens, they need to consolidate long positions (base) above the 1.1570 area and push for an upside move through resonance between momentum and volume. Only then would it have a chance to open bullish space as the exchange rate breaks through the resistance there and returns to test a target area around 1.1600. However, before the euro’s short-term price action successfully holds above the 1.1570 area, the trading-dominant logic indicates there is still a need to guard against a risk warning that after a phased repair the exchange rate could fall again.

From the risk perspective, on the 4-hour timeframe, the current price action structure around the 1.1500 area and the lower band position of the Bollinger Bands form a near-term static-dynamic support defense resonance zone for the euro’s short-term trading. Care should be taken: if on the 4-hour timeframe the euro successfully returns below this area, a heating-up of the bears’ dominant rhythm could increase the risk that the exchange rate returns downward again and tests the 1.1460 target area.

In summary, Trump’s hardening shift in military action against Iran is reshaping the current risk-pricing framework for exchange rates and commodities through the dual mechanism of safe-haven sentiment and the advantage of net oil exporters. The combination effect of high oil prices and a strong dollar will continue to test global market stability until the conflict shows clear easing signals or substantial progress in energy supply recovery emerges. Meanwhile, the U.S. March nonfarm employment report rebounded above expectations, and together with rising U.S. inflation expectations constraining the likelihood of Fed rate cuts, these two factors together form the core narrative framework suppressing the euro’s near-term rebound. From a technical standpoint, since the euro has already risen and reached a phase high, in the absence of further “fundamental confirmation,” it would not be surprising for the bulls to reduce exposure. If the exchange rate continues down with a significant amplification of volatility, it may imply that risk pricing of macro narratives is rising in the market. In addition, the euro was previously under significant pressure around 1.1800—a zone that is both a key resistance hub recently and also a critical fill/recovery area for the euro since it fell from 1.2080. If the short-term price does not form an effective breakout, it would easily trigger some funds to treat it as a phase pressure zone. Therefore, the euro’s potential technical risks reflect that bulls’ defensive positioning needs to hold the 1.1500 area at present in order to provide potential动力 to repair bullish momentum and help lift the exchange rate from near-term to further out. If this defense line is completely lost, the risk should be guarded that a heating-up of bearish momentum dominance could cause the exchange rate to fall back to the low 1.1460 area for correction. Moreover, if bulls want to maintain a recovery posture now, they need to consolidate longs above the 1.1570 area and use a secondary resonance between volume and momentum to provide potential technical space for the exchange rate to rebound and test the 1.1600 target area.

Reference route for euro short-term price action:

Upward: 1.1570-1.1600

Downward: 1.1500-1.1460

Properly plan capital (position sizing), control risk (stop-loss), and follow personal trading “discipline” are the primary conditions. Remember: money isn’t made in a single day, but it can be lost in one day!

Note ⚠️:

The above suggestions are for reference only.

Investing involves risk; enter the market cautiously.

Lingsheng Financial Optivest advisor

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