The strengthening of the US dollar, the Nasdaq Composite entering correction territory, and Brent crude returning above $100 per barrel suggest that markets are skeptical of the US administration’s statements regarding negotiations with Iran. Let’s discuss this topic and make a trading plan for the EUR/USD pair.
The article covers the following subjects:
Major Takeaways
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The US is postponing airstrikes.
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The conflict risks dragging on until the end of April.
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The OECD is raising its inflation forecasts.
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Short trades on the EUR/USD pair can be opened below 1.152.
Weekly US Dollar Fundamental Forecast
While Iran claims that the US is negotiating with its own shadow, Donald Trump calls the talks productive and has postponed airstrikes on Iran’s energy infrastructure for 10 days. The US leader uses his well-known tactic of threats followed by a retreat. It worked well in trade wars, but the Middle East is another matter entirely.
Brent’s return above $100 per barrel, the Nasdaq Composite’s move into correction territory, and the strengthening of the US dollar suggest that the US president has painted himself into a corner. Markets are in no hurry to apply the TACO strategy, as they do not know how long the conflict will last. According to a Deutsche Bank survey, 54% of investors believe it will not end before the end of April, while 42% assume that the Strait of Hormuz will not reopen fully until the end of May. Nevertheless, 55% do not expect Brent to rise above $130 per barrel.
Supply Disruptions and Reserve Capacity
Source: Wall Street Journal.
This situation is highly unusual, given that the current oil crisis is among the most severe in history. Although Saudi Arabia has managed to find temporary workarounds, the global supply shortfall is estimated at around 10 million barrels per day—an unprecedented disruption. The problem is further compounded by the limited ability of Gulf countries to increase spare production capacity.
Amid the escalating conflict in the Middle East, the OECD has refrained from raising its global GDP forecast from 2.9% to 3.2%. The organization warns that a prolonged conflict involving Iran could slow global growth to 2.6%. At the same time, the inflation outlook for the world’s 20 largest economies has been revised upward from 2.8% to 4%. In effect, a stagflationary scenario is beginning to take shape—one in which the US dollar continues to strengthen.
OECD Inflation Forecasts
Source: Bloomberg.
According to Goldman Sachs and Morgan Stanley, the US dollar is expected to weaken as investors grow increasingly concerned about a potential recession. They argue that the Fed would likely resume discussions about cutting the federal funds rate. At the same time, the OECD seems to be reinforcing bearish sentiment on the EUR/USD pair. It has raised its 2026 GDP forecast for the US from 1.7% to 2.0%, while lowering its projection for the eurozone from 1.2% to 0.8%. This suggests that any economic downturn is likely to affect Europe sooner and more severely than the US, increasing the likelihood that the ECB will have to cut interest rates.
Conversely, the 1.2 percentage point increase in the US inflation forecast indicates that markets may be underestimating the risk of further monetary tightening in 2026. The probability of a rate hike is currently estimated at 45%.
Weekly EURUSD Trading Plan
The downside potential for EUR/USD remains largely untapped. The only factor that could alter this outlook would be a meaningful de-escalation of the conflict in the Middle East, accompanied by clear prospects for a resolution. At this stage, such a scenario remains distant despite Donald Trump’s claims to the contrary. Meanwhile, a move by the euro below 1.152 would provide an opportunity to add to short positions initiated around 1.16.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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