EUR/USD traded in a narrow band on Tuesday, extending the past week’s range and sitting around 1.1546, little changed on the session. The move came as the US Dollar steadied near recent lows, with markets watching developments in the Middle East and the reopening of the Strait of Hormuz. Focus also shifts to Wednesday’s US CPI release, which could influence Fed rate expectations for September and set the next directional cue for the dollar and, by extension, EUR/USD.
On the daily chart, the pair is holding between key moving averages, keeping the near-term picture neutral while momentum indicators lean slightly positive. RSI is near 59 and MACD remains in positive territory, even as resistance caps gains at the 100-day SMA at 1.1567, ahead of the 200-day SMA at 1.1630. Support sits at the 50-day SMA at 1.1468, then 1.1400 and 1.1350. Commerzbank’s projections place EUR/USD at 1.18 by mid-2027 versus 1.20 previously, and at 1.19 by end-2027 versus an earlier 1.21 forecast.
Volatility Considerations Around The CPI Event
As we watch the EUR/USD hover around 1.1546 this Tuesday, we advise derivative traders to prepare for a volatility spike ahead of tomorrow’s U.S. CPI release on August 12, 2026. Historically, U.S. inflation data prints spark an average immediate reaction of 60 to 80 pips in this currency pair. Because of this, holding unhedged short options positions overnight carries elevated risk.
Given that the pair remains locked under the 100-day Simple Moving Average at 1.1567, we recommend utilizing range-bound options strategies like iron condors. Selling out-of-the-money puts near the 50-day SMA support at 1.1468 and calls above the 200-day SMA at 1.1630 allows us to capture premium decay. This strategy capitalizes on the typical late-summer liquidity drop, which historically keeps August trading volumes about 15% lower than the annual average.
Directional Strategies And Broader Euro-Dollar Outlook
For traders preferring directional derivatives, we should closely monitor the 100-day SMA for a clean breakout on the daily chart. A confirmed break above 1.1567 could quickly expose the 200-day SMA at 1.1630, making short-term bull call spreads highly attractive. Conversely, if geopolitical tensions ease and the CPI comes in hotter than expected, buying protective puts targeting the 1.1400 floor is a wise defensive play.
Looking further into the coming weeks, macro shifts suggest that the U.S. Dollar’s purchasing power parity premium is beginning to unwind. We expect interest rate expectations to shift downward as the Federal Reserve faces mounting structural challenges, gradually pushing the Euro higher. Positioning with longer-dated LEAPs or diagonal calendar spreads will allow us to ride this gradual upward drift while mitigating short-term noise.
