The Euro (EUR) has decreased by 0.4% against the US Dollar (USD), trading around the 1.10 mark after Thursday’s rise. The market sentiment reflects risk aversion as traders anticipate European responses to recent US tariff actions.
European trade ministers are set to convene on Monday to discuss the tariff situation. Despite this backdrop, the EUR/USD pair is currently stabilising, with resistance levels near 1.11 and potential additional resistance around the August and September highs of 1.12.
Current Market Context
The relative strength index (RSI) is just above 70, indicating overbought conditions, with price movements confined between the mid to upper 1.09s for support.
A sharp 0.4% pullback in the Euro against the Dollar, bringing the pair toward the 1.10 zone, has prompted a reassessment of directional bias in the near term. Following Thursday’s rally, the retreat appears more a reflection of broader caution than a reversal driven by fundamentals alone. Trade discussions set to take place among European ministers early next week are expected to add clarity on policy tone, which in turn may dictate how much room EUR/USD has to move beyond existing resistance.
From a technical point of view, there’s notable congestion around the 1.11 region, formed by prior price compression and short-term sell orders. Beyond that, peaks from August and September sitting closer to 1.12 form a more established ceiling—dense with historical rejections. Any attempt to reach beyond may face exhaustion unless supported by firm catalysts. On the other side, market structure looks stable above the mid-1.09s at the moment, where dip-buying interest has been consistent.
Now, about momentum: with RSI hovering just over 70, the metric aligns with a cautionary view. Overbought readings at this level don’t necessarily signal immediate decline, but they frequently imply stretched conditions that aren’t sustainable unless backed by new input. Movements now risk becoming more erratic if no fresh direction is found.
Strategic Considerations
In forward strategy, we prefer being selective, especially as implied volatility continues to sit on modest levels despite the headline risk. Short-dated contracts might underprice actual movement if tariff dialogues prove more combative than conciliatory. Risk premium therefore may build quickly, and positioning too early could become costly.
Resistance should be treated less as a top, more as a testing zone. If buyers fail to absorb overhead supply above 1.11, reversal probabilities increase. One-sided exposure right now doesn’t pay—particularly with macro news flow scheduled and RSI pressing into stretched readings.
For the immediate few sessions, watching for compression narrowing in spot prices and IV (implied volatility) pushing off recent lows might offer direction. We favour options with moderately wider strikes—less defined bets, more asymmetric potential—while managing gamma into early-week developments.
We also note that any clearer tone from American trade circles may bring direct Dollar impact, so bids around the lower 1.09s should be monitored closely, as these could act as pivot levels for new trades. With sentiment tilting cautious, patience becomes more than just a virtue—it becomes a strategy.
