Euro Dollar Holds Key Support
US rates were up 25bp, linked to expectations of a smaller effect on US inflation. In Europe, EUR ESTR was marked 65bp higher and GBP OIS 80bp higher. This shift could narrow EUR:USD two-year swap differentials, which may reinforce support near 1.1500. Initial resistance is noted at 1.1650, with further gains tied to progress towards a ceasefire. The article states it was produced with assistance from an AI tool and reviewed by an editor. We are seeing a familiar pattern emerge today, March 10, 2026, reminiscent of the energy shock we navigated back in 2025. At that time, the 1.1500 level in EUR/USD proved to be a solid floor as the market repriced European interest rates more aggressively than US rates. This dynamic appears to be repeating, providing a strong historical precedent for the current market.Rate Differentials Drive The Narrative
Renewed tensions in the Strait of Hormuz are again threatening an energy shock, and recent data supports a divergence in central bank outlooks. The Eurozone’s February 2026 HICP flash estimate came in higher than expected at 2.8%, while the latest US CPI remains more contained at 3.1%. This suggests the European Central Bank may be forced into a more hawkish stance than the Federal Reserve. In the options market, we are observing a similar lack of fear for a major downside break in the EUR/USD. The one-month risk reversal is showing reduced demand for EUR puts, suggesting derivative traders are not positioning for a significant decline from current levels. This echoes the sentiment we saw in 2025 when the support level last held. The key driver remains the narrowing interest rate differential, which we see in the two-year swap market where the EUR:USD spread has tightened to -75 basis points from -90 basis points just last month. This makes holding Euros relatively more attractive and reinforces the idea that the 1.1500 support level will hold firm in the coming weeks. Therefore, we see the initial resistance for EUR/USD at the 1.1650 mark. A significant rally beyond this level will likely depend on any de-escalation of the new energy supply concerns. Traders should watch these developments closely, as they will dictate the pair’s ability to break through that ceiling. Create your live VT Markets account and start trading now.
Start trading now – Click here to create your real VT Markets account
