EUR/USD edged lower in Asian trading on Monday, near 1.1870. The 14-day RSI is 56, above 50, after easing from overbought levels.
On the daily chart, the pair is holding above the nine-day EMA, with a positive slope. The nine-day EMA is above the rising 50-day EMA, with the nine-day level at 1.1861.
Key Technical Levels
If price holds above 1.1861, EUR/USD could move towards 1.2082. This is the highest level since June 2021.
A move below the nine-day EMA may direct the pair towards the 50-day EMA at 1.1769. Further support sits at 1.1578, a two-month low set on 19 January.
The technical analysis was produced with the help of an AI tool.
We see the EUR/USD is testing a critical support level at the nine-day EMA near 1.1861. With the RSI indicator holding firm above 50, the underlying momentum suggests that any dips are likely to be short-lived. This presents a clear decision point for our strategies in the coming weeks.
Options Strategy Considerations
Given this technical setup, we should consider buying call options with a strike price below the 1.2082 target if the pair holds above 1.1861 on a daily closing basis. This view is reinforced by recent Eurozone data showing January’s headline inflation holding stubbornly at 2.9%, prompting more hawkish comments from ECB officials last week. The market is now pricing in a higher probability of the ECB being slower to cut rates than the US Federal Reserve.
However, if we see a confirmed break and close below the 1.1861 level, we must be prepared to shift our bias quickly. In that scenario, purchasing put options targeting the 50-day EMA at 1.1769 would be a prudent move to hedge or speculate on further downside. This defensive posture would be necessary as a break of short-term support could signal a deeper correction.
This situation feels similar to the price action we observed in the fourth quarter of 2025, where a consolidation period above the moving averages preceded a strong directional move. The divergence in economic data, with last week’s US retail sales showing a slight slowdown, further supports potential dollar weakness against the euro. Therefore, we should watch the 1.1861 level as the primary trigger for our next derivatives play.
