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In currency markets, the euro has started to weaken while the US dollar shows signs of stabilising.
For traders experiencing their first oil shock, this sudden dollar strength can come as a surprise. However, global oil trade is still largely priced in US dollars, meaning rising energy demand often translates into stronger demand for the currency.
Oil prices have surged following tensions around the Strait of Hormuz, increasing pressure on energy-importing economies.
So this weakening price action on EURUSD and even GBPUSD is largely expected under these conditions.
EURUSD Breaks Rising Channel
The EURUSD weekly chart shows the pair breaking below the rising channel that had supported the euro’s recovery through 2025.
After several tests of the lower boundary, price is now slipping toward an important support area.
The first level to watch sits around 1.137, where the anchored VWAP from the 2025 lows comes into play. Just below that sits a broader structural support zone between 1.12 and 1.13, an area that previously acted as resistance before the euro’s breakout last year.
If EURUSD can hold this region, the pair may begin to stabilise and consolidate.
In that scenario, the euro could attempt a rebound toward 1.16, with a potential retest of the higher anchored VWAP around 1.174 if bullish momentum returns.
However, a sustained break below the 1.12–1.13 support zone would signal that the euro is losing a much larger structural support level.
GBPUSD Is Also Starting to Stall
The GBPUSD weekly chart is showing a similar loss of momentum as the dollar strengthens.
After rallying strongly throughout 2025, the pair has started to stall near the 1.324 region, where upside momentum has been slowing down (notice the bearish divergence).
Price is now sitting right on an anchored vWAP support at 1.324, which it briefly lost in November 2025 but reclaimed for more upside.
If price can hold this level, GBPUSD could see a slight recovery first before more downside.
A lower anchored vWAP support, marked from the 2022 lows, aligns perfectly at 1.277 and the 61.8% Fibonacci retracement.
EURGBP Signals Euro Specific Weakness
EURGBP may be staging a head and shoulders pattern, and there is visible trendline break. This suggests the euro may be weakening not just against the dollar but also relative to the British Pound.
Several fundamental factors help explain why sterling has recently held up better.
Energy exposure
- The eurozone remains heavily dependent on imported energy.
- Higher oil prices tend to hit European industry and trade balances faster.
- The UK still has some domestic energy production through the North Sea, which slightly cushions the impact.
Economic structure
- The eurozone is more manufacturing driven, with Germany acting as the industrial core.
- Manufacturing sectors are more sensitive to energy costs and global trade slowdowns.
- The UK economy is more services focused and less exposed to those shocks.
Rate expectations
- Markets increasingly expect the European Central Bank to cut rates sooner than the Bank of England.
- If that gap widens, capital tends to flow away from the euro and toward higher yielding currencies like sterling.
Together, these factors help explain why EURGBP has started to weaken.
The Dollar May Be Stabilising
The US Dollar Index provides a broader macro context.
DXY recently rebounded from a long-term support trendline that has been in place since 2008 and has reclaimed the 100 level, which previously acted as resistance.
If the index continues to hold above that level, the next region to watch sits between 101.9 and 103.2, where an unfilled gap remains.
A move through that zone could bring the 105 region into focus, which aligns with the double-bottom projection visible on the chart.
Key FX Levels to Watch
For traders, the coming weeks will likely revolve around a handful of key support levels.
For EURUSD, the 1.12–1.13 support zone remains the critical area to watch. Holding this level could allow the euro to stabilise and potentially attempt a recovery toward 1.16.
For GBPUSD, support near 1.32 and 1.27 will likely determine whether the pound stabilises or begins a deeper pullback.
If the dollar continues to strengthen as energy prices remain elevated and US yields rise, both currency pairs could remain under pressure in the near term.
If oil prices stabilise and bond yields ease, the recent weakness in EURUSD and GBPUSD could prove to be a temporary correction rather than the start of a sustained downtrend.
DISCLAIMER: For educational purposes only. Trading comes with substantial risk, leading to possible loss of your capital. Traders are advised to do their own due diligence before investing.
