The EURUSD is targeting 1.1779, the next goal, with the yearly high at 1.1829. It dropped during the Asian session but bounced back during early European trading. After a brief dip below the 100-hour moving average, buyers helped the pair recover back to a range between 1.1730 and 1.1741. Weaker US Empire manufacturing data added to this rebound, causing US yields to fall. The 10-year yield dropped by 2.3 basis points to 4.0375%, after peaking at 4.087% earlier in the day. The high for the day, 1.1772, is close to last week’s high of 1.1779, which is a short-term resistance point.

Potential Barrier Break

If the pair breaks past this level, it could gain more momentum, aiming for July’s highs at 1.1788 and 1.1829, the latter being the highest EURUSD level since September 2021. The area between 1.1730 and 1.1741 serves as support, while 1.1779 is critical for further progress. This recent rise in EURUSD is tied to signs of a slowing US economy, evident in the weak Empire manufacturing report. Last week’s initial jobless claims also rose to 235,000, a two-month high. This suggests the Federal Reserve might not be as aggressive, which pressures the dollar. With this upward trend, we are considering buying call options with strike prices just above the year’s high, around 1.1850 or 1.1900. One-month implied volatility is at 6.5%, making these options cheaper than earlier this year. This strategy could capture a sharp move upward if we break the significant 1.1829 resistance. However, we need to watch the 1.1829 level closely, as it’s a major barrier that hasn’t been crossed since late 2021. The Euro’s strength may reflect the European Central Bank’s tough stance, especially after last month’s Eurozone HICP inflation data remained high at 4.8%. Selling call spreads with a short strike near 1.1825 could be a cautious way to earn premium if this resistance remains intact.

Trading Strategies and Risk Management

For traders expecting consolidation before the next major move, a range-bound strategy could work well. We might set up an iron condor, selling puts around the 1.1730 support and selling calls near the 1.1829 resistance. This method profits from time decay as long as the pair stays between these two key levels in the coming weeks. Looking ahead, we must brace for volatility around upcoming US inflation data and the next ECB policy statement. Significant changes in these releases could trigger a breakout above resistance or push the pair back down to support. Managing our risk around these important data points is crucial. Create your live VT Markets account and start trading now.

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