EUR/USD ended the week below 1.1500, holding just above a multi-week low of 1.1454, after the Federal Reserve lifted rates by 25 bps to set the Fed Funds Target Range at 3.75%–4.00%. Inflation has been above the Fed’s goal since March 2021 and, despite easing through 2025, renewed pressure has been linked to an energy shock tied to a widening Middle East conflict. Disruption at the Strait of Hormuz has focused attention on supply routes; before hostilities, about 25% of global crude oil and petroleum products transited the passage, and over 80% of that flow supplied Asian countries. The Summary of Economic Projections pointed to higher odds of additional hikes before year-end, while Chair Kevin Warsh reiterated a 2% inflation objective and offered no forward guidance.
With the central bank decisions largely absorbed, focus turns back to oil, Fed and ECB speakers, and preliminary September PMIs due on Wednesday from S&P Global and local banks. On charts, EUR/USD trades near 1.1470 and sits below the 100-day SMA at 1.1548, the 20-day SMA at 1.1593 and the 200-day SMA at 1.1629, while the pair is also below the 20-week SMA at 1.1543 but above the 100- and 200-week SMAs at 1.1349 and 1.1087. The RSI is around 44, with support near 1.1450 and then around 1.1350; resistance is seen at 1.1543, 1.1600, 1.1629 and the August high at 1.1710.
Outlook for EUR/USD and Derivative Strategies
We suggest derivative traders prepare for continued downward pressure on the EUR/USD, given its recent close below the 1.1500 mark. Traders should look at buying short-term put options with strike prices targeting the critical support level of 1.1350. The technical indicators show mounting selling momentum, which historically precedes a test of multi-month lows.
Energy Markets, Rate Risk, and Risk Management
We must closely monitor oil price fluctuations, as any escalation in the Middle East will directly feed into US dollar strength through inflationary channels. The Strait of Hormuz remains a massive geopolitical chokepoint, with the U.S. Energy Information Administration noting that over 20 million barrels of oil per day—representing about 20% of global petroleum consumption—transit this route. Call options on crude oil futures or long USD proxy plays remain highly attractive as energy supply fears persist.
With the Federal Reserve raising its benchmark rate to the 3.75%–4.00% range, we believe the options market is still underpricing the potential for another rate hike before year-end. Historically, when the Fed adopts a hawkish stance during energy supply shocks, the implied volatility in major currency pairs rises significantly. Implied volatility plays, such as long straddles on the EUR/USD, could yield strong returns as markets swing between geopolitical headlines and upcoming macroeconomic data.
We advise selling call options or establishing bear call spreads if the EUR/USD attempts a relief rally toward the 20-week Simple Moving Average of 1.1543. On the other hand, a decisive close below the 1.1450 support zone should be treated as a strong signal to increase short delta exposure. Protecting these positions with tight stop-losses near the 200-day moving average of 1.1629 will help limit risks in this highly unpredictable trading environment.
