EUR/USD slipped back towards the 1.1370 area on Monday, trading around 1.1372 after giving up earlier gains as markets stayed cautious ahead of Eurozone growth releases and the Federal Reserve’s policy decision. Risk tone improved after a pause in hostilities between the US and Iran, which pushed Oil prices lower and supported stock and bond markets. West Texas Intermediate was near $83.60 a barrel, down more than 7%, as supply disruption concerns eased.
Attention is on preliminary second-quarter GDP. The Eurozone is seen growing 0.2% QoQ after a 0.2% contraction, while annual growth is forecast at 0.4% versus 0.3%; Germany is expected to be flat QoQ after 0.3% growth, with annual GDP at 0.6% from 0.4%. Germany’s preliminary July CPI is also due, with a 0.7% monthly rise expected after a 0.3% fall, while the prior annual rate was 2.3%. Technically, the pair remains capped under the 20-period SMA at 1.1391 and the 100-period SMA near 1.1420, with the 14-period RSI at 41; resistance sits at 1.1375 and 1.1386, while support is seen at 1.1369.
Derivative Positioning and Technical Outlook
As we navigate the final days of July 2026, we advise derivative traders to position defensively in EUR/USD contracts. With the pair struggling beneath the 20-period SMA at 1.1391 and the 100-period SMA near 1.1420 on the 4-hour chart, the short-term bias remains heavily tilted to the downside. If the support level at 1.1369 breaks, we expect a rapid slide, making short-dated put options or short futures positions highly attractive.
Macro Drivers and Event-Driven Volatility
We must closely watch the upcoming preliminary second-quarter Eurozone GDP print, where a projected 0.2% quarterly expansion follows a previous 0.2% contraction. Historically, when German growth stagnates as it is forecast to do now, the Euro faces steep selling pressure against a resilient US Dollar. Derivative traders can exploit this expected volatility by buying straddles or strangles to profit from sharp, post-announcement breakout moves.
Additionally, easing geopolitical tensions have pulled WTI oil prices down by over 7% to around $83.60, dragging down broader energy-driven inflation expectations. This drop in oil mirrors historical corrections, such as the late 2018 energy slide, which quickly weighed on Eurozone CPI and forced the ECB to remain cautious. If Germany’s July CPI falls short of the expected 0.7% monthly rebound, we anticipate the Euro will drop further, reinforcing our bearish near-term outlook.
