The euro traded just under 1.1500 against the US dollar after slipping beneath the 50-day and 200-day Exponential Moving Averages, which sit six pips apart just above 1.1550. The European Central Bank lifted its deposit rate to 2.50% last Thursday, and the Federal Reserve followed with a quarter-point rise to 3.75–4.00% on a unanimous vote, leaving the midpoint differential at 1.375 percentage points, unchanged on the day. The move instead tracked the Fed’s updated rate outlook: the median end-2027 projection rose to 4.1% from 3.6%, while the ECB offered no guidance beyond its next meeting.
In the subsequent press conference, the Fed chair tied future policy to confidence that underlying inflation is moving to a 2% target “clearly and at sufficient speed”, a condition he said recent summer data had not met. He also confirmed he did not submit his own projection, as in June, leaving the 4.1% median as the view of 18 participants. On the chart, support was seen near 1.1450, with 1.1400 below, while resistance sat at the EMA band and then 1.1600; Stochastic Relative Strength Index was near 15, and a daily close above 1.1600 would negate the bearish setup.
Trading Strategies for Euro Weakness
We suggest derivative traders position for a stronger US dollar in the coming weeks after the Euro broke below the key 1.1500 support level. This technical breakdown follows recent policy decisions where the Federal Reserve’s hawkish forward projections overshadowed the European Central Bank’s silence on future steps. To capitalize on this momentum, we recommend utilizing short-dated put options on EUR/USD or short futures contracts targeting the 1.1450 and 1.1400 levels.
This bearish outlook is supported by recent economic indicators, such as Eurostat’s inflation report showing Eurozone consumer price growth cooling to 2.2%, which reduces the pressure on the ECB to match the Fed’s hawkishness. In contrast, the US economy remains resilient, with recent jobs and retail data supporting the Fed’s higher-for-longer rate stance. This fundamental gap makes the Fed’s new 4.1% median rate projection for 2027 highly credible, giving the US dollar a distinct yields advantage in the near term.
Risk Management and Technical Triggers
While the daily Stochastic RSI is deep in oversold territory near 15, hinting at a potential short-term bounce, we should view any rallies toward 1.1550 as selling opportunities. The zone just above 1.1550 is heavily reinforced by the 50-day and 200-day exponential moving averages, which will now act as strong resistance. We advise placing stop-loss buy orders just above 1.1600, as a daily close above this level would completely void our bearish bias.
For options traders, we favor buying EUR/USD put options with a strike price of 1.1400 expiring in October to capture this downward drive. Selling out-of-the-money call options at the 1.1600 level can also generate attractive premium income while the currency pair remains capped by its moving averages. Historical data shows that when the Euro breaks below its dual moving averages during a period of monetary divergence, it typically falls by another 1% to 2% within three weeks.
