EUR/USD rose on Friday as the US Dollar weakened, trading at 1.1742 and close to the week’s high of 1.1755. USD/JPY fell by nearly 200 pips within seconds in thin Labour Day trading, after alleged Japanese intervention for a second time in two days.
The move pushed the Dollar lower across markets and helped EUR/USD recover from Thursday’s low at 1.1655. Attention remained on Eurozone inflation data and the European Central Bank keeping rates unchanged while signalling a possible near-term rise.
Euro Policy Signals
Bundesbank president Joachim Nagel said the baseline scenario involves tighter monetary policy and referred to a possible rate rise in June. In geopolitics, the Strait of Hormuz entered its third month of blockade, with no stated plan to reopen it.
Oil stayed above $100, with Brent at $113.94. This level increases energy costs for Eurozone crude importers.
EUR/USD stayed within a broad 100-pip band, with support above 1.1650 and resistance below 1.1750. On the 4-hour chart, RSI reached 60 and MACD showed a widening green histogram.
Resistance levels include 1.1755, then about 1.1790, and the area below 1.1850. Supports sit between 1.1675 and about 1.1645, then 1.1580, and near 1.1500.
Looking Back To Spring 2025
We remember this time last year, in spring 2025, when EUR/USD was testing the 1.1755 level on the back of a hawkish European Central Bank. The geopolitical situation was tense, with Brent crude above $113 a barrel due to the Hormuz blockade, creating significant headwinds. This set a very different stage compared to where we are now.
Today, on May 1, 2026, the picture is markedly different, with the pair trading much lower around 1.0830. The interest rate differential is a key factor, as the Federal Reserve’s rate stands at 5.50% while the ECB’s is a full percentage point lower at 4.50%. This divergence helps explain why the dollar has regained its footing since the events of last year.
With Eurozone inflation having cooled to 2.4% as of April 2026, the ECB’s hawkish tone from 2025 has softened considerably, and markets are now pricing in potential rate cuts later this year. US inflation remains stickier at 3.5%, suggesting the Fed may hold rates higher for longer. This policy divergence is a strong bearish signal for the euro.
Given this clearer policy divergence, implied volatility for EUR/USD options has receded from the highs seen during the geopolitical turmoil of 2025. Traders might consider strategies that benefit from a range-bound or slowly declining market, such as selling out-of-the-money call options to collect premium. Buying puts could also be a straightforward way to position for a further slide towards the 1.0700 level.
The technical resistance near 1.1755 that was so critical last year is now a distant memory, with sellers currently focused on defending the 1.0900 psychological level. The resolution of the Hormuz blockade has also provided relief, as Brent crude now trades at a much more manageable $88 per barrel. This has eased a major source of stagflationary pressure on the European economy, but the focus has clearly shifted to interest rate differentials.
