The EURUSD currency pair is nearing its 200-hour moving average, which is currently at 1.15776. Earlier, it tested a swing zone between 1.1518 and 1.1529 during the European session. In this range, buyers found support and pushed the pair upwards. For sellers, dropping below the 38.2% retracement level at 1.1558 could indicate a possible reversal. In contrast, if buyers break the 50% retracement level at 1.1610, that would be their next target.

US Bond Yields Impact

The rise of EURUSD is partly due to falling U.S. bond yields. The 10-year yield has dropped slightly by 0.2 basis points, while the 30-year yield has decreased by 1.6 basis points. This decline weakens the USD and boosts the EURUSD pair. Currently, we’re observing EURUSD pushing against its 200-hour moving average at 1.1577. This level is a key battleground for both buyers and sellers after strong support was found around 1.1520. How this situation unfolds could influence market trends for the month. The increase in value is also supported by softening U.S. bond yields. The market expects the Federal Reserve to pause rate hikes, especially after the July 2025 jobs report showed slower hiring than expected. We saw similar dollar weakness at the end of 2024 when the Fed hinted that it was nearing the end of its rate-hiking cycle.

ECB and Fed Policy Divergence

In contrast, the European Central Bank (ECB) appears to be pursuing a different strategy. Eurozone inflation was last reported at 3.1%, which is above their target, leading to pressure for a more hawkish approach. This difference in policies between a potentially pausing Fed and a firm ECB is a major factor fueling the Euro’s strength. For traders expecting a rise above 1.1577, buying call options with a strike price near the 1.1610 target can be a simple way to benefit from the upward trend. Options set to expire in late August or September offer ample time for this scenario to develop. This strategy helps define risk while allowing for potential gains if the trend continues. A more cautious approach would be to use a bull call spread. By purchasing a call option and selling another one at a higher strike price, traders can lower the initial position cost. This is particularly effective if the price increases but stalls before breaking out more significantly. Traders should also be on the lookout for a failure at the current moving average. If sellers regain control and push the price below 1.1558, it could suggest that the upward move has lost momentum. In such a case, buying put options or setting up put spreads could allow traders to profit from a potential decline back toward the 1.1520 support level. Create your live VT Markets account and start trading now.

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