EUR/USD was steady after two days of losses, trading near 1.1690 in Asian hours on Tuesday. It slipped below 1.1700 and is testing support at the 50-day EMA near 1.1682.
Price action is near the lower boundary of an ascending channel, which can point to a bearish reversal if that boundary gives way. The pair is just above the 50-period EMA but remains below the nine-period EMA, suggesting consolidation.
Neutral Momentum Signals
The 14-day Relative Strength Index is near 50, indicating neutral momentum. This follows a recent recovery that has not yet developed into a clear direction.
If EUR/USD breaks below the channel, it may face downward pressure towards the nine-month low of 1.1411, set on March 13. Support is focused around 1.1682, where the 50-day EMA meets the channel base.
On the upside, the first barrier is the nine-day EMA at 1.1706. A break above it could open the way to 1.1849, the 11-week high from April 17, then the channel top near 1.1960, and later 1.2082, the highest since June 2021, reached on January 27.
Looking back at the analysis from this time in 2025, we saw the EUR/USD pair in a tight consolidation around the 1.1700 level. The market was testing its 50-day moving average, and overall momentum was neutral. This suggested a period of indecision for traders at that point.
Shift In Macro Drivers
Today, the situation has changed significantly, with the pair trading much lower near 1.0850. The primary driver is now a clear policy divergence, as the European Central Bank has begun cutting rates while the Federal Reserve signals it will hold rates higher for longer. This contrasts sharply with the technical consolidation we observed last year.
Current statistics reinforce this bearish pressure, with Eurozone inflation now at 2.4% while US inflation remains more persistent at 3.5%. This growing interest rate differential in favor of the US dollar suggests the path of least resistance for the pair remains downwards. We are seeing this reflected in derivatives pricing, which is skewed towards further euro weakness.
For the coming weeks, traders should consider strategies that benefit from this downward momentum. Buying put options with a strike price around 1.0750 offers a way to profit from a continued decline while clearly defining risk. A bear put spread could also be used to lower the upfront cost of positioning for a drop.
Given the potential for sharp moves around upcoming economic data releases, those expecting a spike in volatility could implement long strangles. This involves buying an out-of-the-money put and an out-of-the-money call option, a strategy that profits from a large price swing in either direction. This is a pure volatility play, reflecting the current market uncertainty.
The levels we watched in 2025, such as the support near 1.1682 and the high of 1.1849, are now distant memory and serve as major long-term resistance. The market’s focus has shifted substantially lower, with any rallies toward the 1.1000 level now viewed as selling opportunities. That previous ascending channel has clearly been broken for some time.
