The euro fell more than 0.5% against the US dollar on Thursday, extending a move down from Wednesday’s high near 1.1625 to just below 1.1520. The drop came as risk-off trading returned, with higher oil prices and a stronger dollar weighing on the crude-importing euro area.
In a televised message on Wednesday, US President Donald Trump gave no deadline on the Iran war and repeated calls for allies to “build up the courage” to secure the Strait of Hormuz. After two days of improved risk appetite, equities fell while oil and the US dollar rose.
Technical View On Eur Usd
From a technical view, EUR/USD was capped on Wednesday just below 1.1630 at a reverse trendline from a broken bullish channel, keeping the broader downtrend in place. The MACD is close to crossing below its signal line, and the RSI is below 50.
Price pressure is building towards the March 19 and 31 lows near 1.1440, ahead of the March 13 low at 1.1411. Below that, the 127.2% Fibonacci extension sits at 1.1327, while resistance is at 1.1606, 1.1630, and near 1.1640.
We are seeing a familiar pattern where geopolitical tensions are pushing oil prices higher and strengthening the US Dollar. With West Texas Intermediate crude now holding above $95 a barrel, the energy-importing Eurozone is under significant pressure. This is creating a headwind for the Euro, which is currently struggling to stay above the 1.0750 mark against the dollar.
The fundamental outlook supports continued weakness in the EUR/USD pair. Recent data shows German manufacturing PMI dipped to 47.5, signaling a contraction, which likely keeps the European Central Bank hesitant to raise rates. Meanwhile, US inflation remains sticky at 3.1%, suggesting the Federal Reserve will maintain its hawkish stance for longer.
This situation reminds us of the risk-off environment we saw during the Iran tensions back in 2025, when a flight to safety similarly boosted the Greenback. Today, the dynamic is repeating, as capital seeks the relative security of US assets. This confirms our view that the path of least resistance for the EUR/USD is downwards.
Derivatives Positioning And Volatility
For the coming weeks, derivative traders should consider positions that profit from a decline in the Euro. Buying put options on the EUR/USD with a strike price around 1.0650 could be an effective strategy to target the next leg down. Alternatively, outright selling EUR/USD futures contracts presents a direct way to short the currency pair.
The tense market has also pushed implied volatility higher, making options more expensive. This environment is favorable for selling out-of-the-money call spreads to collect premium while defining risk. We anticipate volatility will remain elevated as long as oil prices stay firm and markets remain on edge.
Traders should watch the 1.0850 level as a key area of resistance. A decisive break above this point, perhaps triggered by a sudden easing of geopolitical risks, would signal that our bearish thesis may need to be reassessed. Until then, any rallies in the Euro should be viewed as opportunities to establish short positions.
