EUR/USD Plunges Below 1.1600 on Middle East Crisis and Fed-ECB Divergence

EUR/USD fell sharply below the 1.1600 level on Monday as a convergence of bearish drivers hammered the euro against the surging US dollar. The escalation of Middle East hostilities triggered an energy price shock particularly detrimental to the energy-import-dependent Eurozone economy, while simultaneously boosting safe-haven dollar demand. The Fed-ECB policy divergence widened further, with markets now pricing in a more hawkish Federal Reserve stance due to oil-driven inflation risks, contrasted against expectations of continued ECB easing to support a weakening European economy. Technical selling accelerated the decline as the pair broke through multiple support levels, with the 1.1600 handle giving way to trigger stop-loss orders. Immediate support now lies near 1.1550, with the 200-day moving average providing the next major technical floor. Resistance has formed at the broken 1.1600 level, which may now act as a ceiling on any recovery attempts. Traders should watch for ECB commentary on the energy shock and upcoming US inflation data for directional cues on this pair.