EUR/USD was set for a fourth straight weekly rise on Friday but pared earlier gains, trading near 1.1682 after a brief move above 1.1700, its highest since 14 May. The week’s advance was associated with a broadly softer USD, while front-end spreads have narrowed since late June, aiding the pair’s recent fundamental backdrop. Price action has also pushed through the 1.1625/50 area, keeping the short-term bias tilted towards the mid-to-upper 1.17s.
Technically, EUR/USD has retaken the 50-day, 100-day and 200-day Simple Moving Averages, clustered between roughly 1.1475 and 1.1631, though momentum looks increasingly stretched. The MACD remains positive, yet the RSI is near 73, consistent with overbought conditions. Resistance is seen around 1.1700 and then 1.1800, while support sits at the 200-day SMA near 1.1631, followed by the 100-day SMA at 1.1573 and the 50-day SMA around 1.1475; below that, 1.1400 is the next level in view.
Drivers and Outlook for Continued Gains
We are seeing the EUR/USD pair post its fourth consecutive weekly gain as it hovers around 1.1682, having briefly broken past the 1.1700 threshold. This upward move is largely driven by a weakening US Dollar as narrowing front-end yield spreads support the Euro. We believe derivative traders should prepare for increased volatility as the pair tests its highest levels in months.
Recent economic data supports this cautious but bullish outlook, with the US Federal Reserve keeping its benchmark rate near 4.0% in August 2026 after successive rate cuts. Meanwhile, Eurozone inflation has stabilized near the 2.2% mark, allowing the European Central Bank to narrow the interest rate gap. This shifting yield differential historically supports a stronger Euro over the medium term, favoring eventual upside.
Technical Risks and Derivative Strategies
While the medium-term momentum remains bullish after reclaiming the 50, 100, and 200-day moving averages, we must note that the Relative Strength Index (RSI) is flashing caution near 73. This overbought reading suggests that the immediate upside could be limited, making direct spot long positions risky at current levels. To navigate this, we recommend utilizing options strategies, such as buying near-term put options, to hedge against a temporary pullback.
If the market pulls back, we expect strong support to emerge around the 200-day moving average at 1.1631. Derivative traders can look to write put options or enter bull call spreads around this support zone to capture the next leg up. Conversely, a clean break above the 1.1700 resistance zone would open the door for a rapid move toward 1.1800.
