EUR/USD slipped to the upper 1.15s and hit a fresh two-week low, with the euro down 0.2% against the US dollar, as measures of EUR sentiment turned bearish. With the domestic data calendar quiet, focus shifted to broader drivers, and the move was linked to a recovery in oil prices that raised concerns over the euro area’s terms of trade as a major energy importer. The pair is drifting below Scotiabank’s narrow fair value estimate of 1.1619, even as yield spreads remain supportive.
On the technical side, the bank rates short-term signals as neutral, though the RSI is near 50 and has edged just below into bearish territory. Attention has moved to downside levels, with near-term support seen at 1.1520 after a drift below 1.1580, and further support flagged near the 50-day MA at 1.1499. Resistance is expected around 1.16 to 1.1620, while the medium-term range since mid-2025 is described as flat, with wide congestion centred in the mid-1.16s.
Bearish Outlook Driven By Oil Surges And Sentiment Shift
We advise derivative traders to position for a weaker Euro in the coming weeks as EUR/USD breaks below its fair value estimate of 1.1619. Brent crude oil prices have surged recently, climbing past $80 a barrel in late August 2026, which heavily pressures the Eurozone’s terms of trade as a net energy importer. This shift has pushed short-term bearish sentiment to the forefront, completely overpowering previously supportive yield spreads.
Derivative Strategy: Positioning For Downward Momentum
To capitalize on this downward momentum, we recommend buying out-of-the-money put options on EUR/USD targeting the 1.1520 support level. Utilizing a bear put spread with an expiration in late September 2026 can limit premium costs while capturing the drift toward the 50-day moving average near 1.1499. Implied volatility in Euro options remains relatively cheap compared to historical averages, making long-gamma downside plays highly attractive right now.
Traders must manage their risk closely as we expect strong resistance to cap any counter-trend rallies in the 1.1600 to 1.1620 range. Historically, when the Relative Strength Index (RSI) dips into bearish territory alongside rising energy costs, EUR/USD tends to test lower boundaries before finding solid ground. If spot prices fail to hold the 1.1500 psychological floor, we should prepare for an extended move toward the lower congestion bands established since mid-2025.
