Daily Market Update
March 31, 2026EUR/USD ranged from the mid to high 1.14’s overnight. EUR/USD succumbs to extra downside momentum in quite a negative start to the week, approaching the area of yearly lows near the 1.1400 neighbourhood and retreating for the fifth day in a row.
The continuation of the deep retracement in the pair comes in response to the equally persistent advance in the US Dollar (USD), as investors favour the safe haven space in the current context of unabated geopolitical jitters in the Middle East.
Net longs have been steadily trimmed, dropping to just above 9K contracts in the week ending March 24. That is a sizeable reduction in bullish exposure and lines up with the loss of momentum from the 1.1600 area.
What stands out is the nature of the move after open interest declined, suggesting positions are being closed rather than flipped into shorts. This is not a bearish turn, it is more a story of fading conviction.
As a result, the market now sits in a much more neutral positioning environment. That reduces the risk of a crowded long squeeze, but it also removes an important layer of support for the Euro.
Reports suggest that diplomatic efforts are underway to introduce a one-month ceasefire mechanism to allow the US and Iran to negotiate on a plan to end the war.
This follows US President Donald Trump’s decision to delay planned strikes on Iran’s energy infrastructure by five days, fueling hopes for a de-escalation of tensions in the Middle East.
The conflict, however, has shown no signs of easing, with Israel continuing its strikes on the Islamic Republic, and the Trump administration has directed thousands of soldiers from the US Army’s elite 82nd Airborne Division to the Middle East.
Moreover, Iran fired a new missile barrage at Israel, while Gulf countries also reported repeated drone and missile interceptions, as fighting intensifies in Lebanon and Iraq.
This keeps geopolitical risks in play and acts as a tailwind for Crude Oil prices, fueling inflation fears and hawkish US Federal Reserve (Fed) expectations.
In fact, traders have nearly priced out the possibility of any further rate cuts by the Fed and are rapidly increasing bets for a hike by the end of this year. The outlook, in turn, assists the USD to attract some buyers and caps the upside for the GBP/USD pair.
The WSJ report showed that US President Trump doesn’t intend to extend the conflict beyond the set timeline of four to six weeks, and has damaged Tehran’s navy and missile infrastructure significantly.
During the press time, S&P 500 futures trade significantly higher as fresh de-escalation in Middle East conflicts has improved the market sentiment. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is almost flat around 100.45.
Amid improving investors’ risk appetite, the US Dollar has not faced intense selling pressure as oil prices are expected to remain higher due to Iran’s continuous military dominance on the Strait of Hormuz, a scenario that will keep global inflation projections elevated.
Source FX Street
