EUR/USD extended its decline in the Asian session on Tuesday after retreating from the 1.1835 area. The pair traded around 1.1775–1.1770, down nearly 0.15%, as the US dollar strengthened slightly.
Traders are watching for a clear break below the 61.7% Fibonacci retracement level, following the recent bounce from the 200-day simple moving average (SMA) support that was tested in January. A move below last week’s low at 1.1745–1.1740 could deepen the pullback from around 1.2100, the highest level since June 2021, set last month.
Technical Indicators Signal Mild Bearish Momentum
The MACD histogram has moved further into negative territory. The MACD line remains below the signal line and is hovering near zero. The RSI is at 46, below the 50 midpoint, which suggests mild bearish momentum without signaling oversold conditions.
The next support on the downside is near the 78.6% retracement level around 1.1695. The 200-day SMA is rising slightly and stands at 1.1658, and the pair is still trading above it.
Part of this technical analysis was produced with the help of an AI tool.
We saw similar bearish pressure build on EUR/USD in 2025, when the pair traded near 1.1775. At that time, the negative MACD and an RSI below 50 correctly pointed to weakening momentum. The pullback later continued and broke below key moving-average supports we were tracking throughout the year.
Current Macro Backdrop Favors The Dollar
The situation has changed, with EUR/USD now trading much lower near 1.0750 as the US dollar stays strong. A key driver is the interest-rate gap: the US Federal Reserve’s policy rate is 4.75% while the European Central Bank’s is 3.5%. That 1.25 percentage point difference continues to favor US dollar assets.
Given this backdrop, derivatives traders may consider buying EUR/USD put options to position for more downside in the coming weeks. Recent data showing Eurozone inflation easing to 2.8% gives the ECB less pressure to stay aggressive, which could weigh on the euro. Puts with a strike near 1.0650 offer a defined-risk way to target the lows from late last year.
That said, volatility could rise around the upcoming US non-farm payrolls release. A weaker-than-expected jobs report could temporarily weaken the dollar and spark a short-term bounce in EUR/USD. To hedge that risk at a low cost, traders could consider out-of-the-money call options with a strike above 1.0900.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
