The Euro fell more than 0.5% against the US Dollar on Thursday. EUR/USD extended its pullback from near 1.1625 to just below 1.1520, with the pair approaching 1.1500.
Risk-off trading returned as hopes for a quick end to the Iran war eased. This supported the US Dollar and pushed Oil prices higher, weighing on the Eurozone as a net crude importer.
Risk Off Sentiment Returns
US President Donald Trump gave no deadline on the conflict in a televised message on Wednesday. He repeated calls for allies to “build up the courage” to secure the Strait of Hormuz, after which equities fell and Oil and the US Dollar rose.
On the chart, the rebound stalled on Wednesday below 1.1630 at the reverse trendline of a broken bullish channel. This keeps the wider downtrend in place, with MACD nearing a bearish cross and RSI below 50.
Support levels sit near the March 19 and 31 lows around 1.1440, then the March 13 low at 1.1411, and the 127.2% Fibonacci extension at 1.1327. Resistance is at 1.1606, then 1.1630 and about 1.1640.
We are seeing a familiar pattern emerge, reminding us of the situation around this time last year in 2025. Back then, heightened geopolitical tensions drove oil prices up and sent the EUR/USD pair tumbling from above 1.1600. This risk-off sentiment created a strong bid for the US Dollar as a primary safe haven.
Options And Hedging Strategy
Today, the Euro is trading at a much weaker level of around 1.0850, as those fundamental pressures have only grown. Brent crude oil remains elevated, recently trading near $89 a barrel, which continues to squeeze the energy-importing Eurozone economy. This contrasts with the US, where inflation data from March showed a 3.5% annual rate, keeping the Federal Reserve from cutting interest rates.
Given this backdrop, buying EUR/USD put options seems like a prudent strategy for the next few weeks. This approach provides direct exposure to further downside in the currency pair while capping potential losses at the premium paid. We should also anticipate a rise in implied volatility, which typically accompanies periods of heightened market stress and geopolitical risk.
Looking at the charts, the support level from 2025 near 1.1440 is now a distant memory and represents a major resistance zone. The immediate targets for bearish positions are likely closer to the 1.0700 mark, making put options struck around that level particularly attractive. Traders holding any long Euro positions should consider using short futures contracts to hedge against a further decline.
The persistent strength in the oil market presents a related opportunity. The same tensions that are hurting the Euro are directly boosting crude prices. Therefore, purchasing call options on WTI or Brent futures could serve as an effective way to trade this ongoing theme.
