The recent EU tariff delay came after important talks among key leaders, likely due to worries about how tariffs affect US economic growth. European stocks have responded well, rising 10% this year, while the S&P has dropped 2%. The EUR/USD currency pair is showing a strong upward trend, with current gains in the low 1.14 range. Support levels are at 1.1325/50, and resistance levels are at 1.1460 and 1.1580/00.

Strong Start For EUR/USD

The EUR/USD pair had a solid start to the week, breaking past the 1.1400 mark. At the same time, the US Dollar weakened as the US-EU trade deadline was extended. Bitcoin also rose above $109,000 due to improved market sentiment following the tariff delay. Gold, however, has seen its gains capped at $3,350 per troy ounce, even after last week’s increase. With the tariff deadline pushed back, markets are experiencing less tension between the US and Europe. European stocks are benefiting from this calming atmosphere, reflected in a 10% gain this year, while US stocks have taken a step back due to concerns about domestic demand. Both technical and fundamental indicators show that the euro is gaining strength. The EUR/USD pair has climbed above 1.1400, a key level many traders were watching. It is now close to 1.1450 and testing higher resistance around 1.1580. The support area between 1.1325 and 1.1350 should hold, assuming the overall economic conditions remain stable. The dollar’s decline, due in part to softer forecasts and geopolitical issues, is helping this rise. Yields in Europe haven’t greatly increased despite the stock market rally, suggesting that stock performance isn’t currently linked to expectations for interest rates. This disconnect could lead traders to rethink volatility levels in euro-related assets. In particular, holding short gamma in euro options might feel risky right now, leaving little room for mistakes if volatility increases—especially with upcoming inflation data or remarks from policymakers.

Market Sentiment And Volatility

The spike in Bitcoin to over $109,000 shows how quickly market sentiment can change. Various factors, including better liquidity and the delay in tariffs, contributed to this rapid move. It reflects a renewed appetite for risk across multiple asset classes, which may put pressure on traditional safe havens. Gold seems to be stuck despite last week’s upward trend. It has encountered strong resistance around $3,350 per ounce and hasn’t moved higher, even with the dollar’s pullback. This may indicate hesitation among major buyers or simply a pause after previous significant gains. For hedging purposes, its positioning appears lighter than many expected. As we move into the next couple of weeks, options pricing in currencies and metals must catch up with current price movements. Traders holding short positions on EUR or long positions on XAU may want to reconsider their strategies. It may not be necessary to exit entirely, but adjusting stops or developing protective measures is wise. Changes in strike skew and implied volatility should be analyzed carefully, as they show where risk is being priced. As the trade deadline extension impacts asset prices, currency volatility may remain elevated while equity volatility decreases. This divergence presents a trade opportunity. Focusing on relative volatility between FX and equity indices may yield selective chances, especially when using calendar spreads or vanna-based trades. Timing remains critical. If the euro continues its positive trend and breaks through resistance at 1.1460, the pace of interest rate adjustments between Europe and the US could speed up. Yield spreads haven’t fully reacted to this strength, suggesting there’s still room for short-term fluctuations. Such gaps can often result in sharp reversals during the week. The upcoming sessions provide great opportunities: being long on the euro with tight downside options, selectively holding risk in metals near resistance, and positioning short on the dollar with clear exit plans. Current price movements offer clearer signals—it’s time to act carefully and decisively. Create your live VT Markets account and start trading now.

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