The euro rose 0.4% against the US dollar and was a mid-performer among G10 currencies. It was supported by market risk mood linked to the US\/Iran conflict, even as German trade data weakened.<\/p>\n
Yield spreads narrowed as expectations for ECB tightening eased. June is priced at 19 bpts, about 10 bpts below the peak after the 30 April policy meeting.<\/p>\n
In options markets, risk reversals showed less demand for protection against euro weakness. Premiums may shift towards upside protection, as seen in late 2025 and early 2026.<\/p>\n
German trade data weakened due to a rise in energy imports in March. The euro showed little reaction to the prospect of renewed trade tensions and tariff threats for 4 July.<\/p>\n
Technically, EUR\/USD held support in the mid-to-upper 1.16s near the 38.2% Fibonacci retracement of the Jan\u2013Mar decline. It then moved above the midpoint at 1.1746 towards the 61.8% level at 1.1825.<\/p>\n
The RSI was in the upper 50s, which pointed to positive momentum. The near-term range was set at 1.1720 to 1.1820, with scope to revisit the January high above 1.20.<\/p>\n
Back in the first quarter of 2026, we saw a bullish technical structure forming for the Euro, with analysis suggesting a potential push back towards the 1.20 highs seen in January. This view was supported by the pair moving above key Fibonacci levels and a rising RSI indicator. At the time, options markets also signaled fading demand for downside protection, which added to our confidence.<\/p>\n
However, as of today, May 8, 2026, that upward momentum has clearly stalled as interest rate differentials have moved decisively against the Euro. Recent US non-farm payrolls for April came in strong at over 250,000, while last week\u2019s Eurozone flash CPI missed expectations, printing at 1.9% and pushing back expectations for any near-term ECB rate hikes. This growing policy divergence means traders should now be cautious about further Euro strength.<\/p>\n
For derivative traders, the environment has shifted from buying upside calls to considering strategies that profit from range-bound action or protect against a downturn. Looking at historical data from 2024, similar periods of policy divergence led to a multi-month decline in EUR\/USD of over 5%. One-month risk reversals now show a renewed premium for EUR puts, a notable change from the sentiment observed in late 2025 and early 2026.<\/p>\n
The recent German IFO Business Climate index also fell to a six-month low of 92.5, confirming that the weaker German trade data we saw in March was not an isolated event. Consequently, we believe selling call spreads with a strike above the recent high near 1.1980 could be a viable strategy. Traders should watch for a potential test of the 1.1720 level in the coming weeks.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Euro gains as risk mood supports; ECB tightening bets fade; options less bearish; EUR\/USD targets 1.1825.<\/p>\n","protected":false},"author":103,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[9],"class_list":["post-49863","post","type-post","status-publish","format-standard","hentry","category-live-updates","tag-dollar"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/49863","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=49863"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/49863\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=49863"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=49863"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=49863"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}