EUR/USD recovered early losses and traded slightly higher near 1.1730 in Monday’s Asian session. The move came as the US Dollar weakened, with the US Dollar Index (DXY) down 0.06% to about 98.45.
DXY opened around 99.35 after the US cancelled a visit to Islamabad for further Iran peace talks. The cancellation came as Iran’s foreign minister Seyed Abbas Araghchi visited Pakistan to resume discussions.
Geopolitical Developments And Market Impact
Iran presented a proposal to the US to reopen the Strait of Hormuz and end the war, according to Axios as cited by Bloomberg. The proposal included delaying nuclear talks until after any US blockade of the Strait of Hormuz is lifted, in the context of an almost two-month-long conflict.
Volatility is expected this week as the Federal Reserve and the European Central Bank announce policy on Wednesday and Thursday. EUR/USD remains above the 20-day EMA at 1.1696, with RSI at 54.9.
Resistance sits at 1.1749, then 1.1828, 1.1941, and near 1.2085. Support levels include 1.1696, 1.1670, 1.1572, and around 1.1413.
As of today, April 27, 2026, we are watching the EUR/USD trade near 1.0850, a level far below what we saw in a similar setup back in 2025. That year, the pair was trading much higher around 1.1730, but the market was also tense ahead of major central bank meetings. The fundamental drivers of volatility, central banks and geopolitics, remain the same today.
We recall how in 2025, tensions between the US and Iran over the Strait of Hormuz caused a sharp, but temporary, spike in the US dollar. Today, while that specific issue has faded, we are now focused on trade disputes in the Asia-Pacific region which could trigger similar safe-haven dollar buying. This shows how geopolitical risk can quickly shift market sentiment, making headline-driven volatility a key factor.
Central Banks And Policy Divergence
The upcoming Federal Reserve and European Central Bank meetings this week are the market’s primary focus, just as they were then. However, the economic data is now much different; recent reports from earlier this month showed US inflation holding firm at 2.8%, while Eurozone inflation has cooled to 2.1%. This growing divergence suggests the Fed has more reason to maintain a restrictive policy than the ECB.
Given this policy divergence, we are looking at buying EUR/USD put options with a strike price around 1.0800 to position for a potential downward move. These options would provide downside exposure if the Fed signals a more hawkish stance than anticipated. A break below this level could open the way for a slide towards the year’s low of 1.0720.
Volatility is expected to rise sharply around the announcements, and the Cboe EuroCurrency Volatility Index has already ticked up to 8.2 in anticipation. For traders who expect a big move but are unsure of the direction, a long straddle strategy involving buying both a call and a put option could be effective. This would allow a trader to profit from a significant price swing, regardless of whether it is up or down.
We remember from the 2025 incident how fast the market can turn on a single piece of news. Therefore, any long positions should be protected with stop-loss orders below the immediate support at 1.0820. The key is to manage risk carefully, as a surprise from either central bank could easily overwhelm the technical picture.
