EUR/USD is trading around 1.1600, roughly the midpoint of its range since April, even as the euro’s terms of trade have deteriorated. That resilience has left the onus on the US dollar side of the equation, while the near-term macro backdrop in the Eurozone offers little in the way of scheduled catalysts.
ING expects the European Central Bank to deliver a 25bp hike, but characterises it as dovish and insufficient to endorse the extra 50bp of tightening currently priced by markets. With the Eurozone calendar described as quiet, the bank sees limited rationale for a move through resistance at 1.1640/45; a break would bring 1.1675/80 into view. ING’s end-September target is 1.15, tied to an anticipated Federal Reserve hike.
Eurozone Fundamentals and Downward Pressure Outlook
We see the euro currently trading near the mid-range of 1.1600, a level it has struggled to break cleanly away from over the past several months. Given the recent slide in the Eurozone’s terms of trade, we believe derivative traders should position for downward pressure rather than chasing temporary rallies. Selling pressure is likely to intensify as energy import costs and broader macroeconomic headwinds continue to erode the euro’s fundamental support.
Derivatives Trading Strategy and Key Levels
We suggest derivative traders target a move down to 1.1500 by the end of September 2026. This bearish outlook is supported by recent Eurozone economic data, where retail sales fell by 0.3% and industrial production remains sluggish. At the same time, we anticipate the Federal Reserve will maintain a hawkish stance, widening the interest rate differential in favor of the US dollar.
To execute this strategy, we recommend utilizing short-dated EUR/USD put options with strike prices near 1.1500. Traders can also establish bear put spreads to limit premium costs while capping risk just above the key resistance level of 1.1645. Any short-term spikes toward 1.1640 should be viewed as optimal entry points to add to short positions.
