EUR\/USD Struggles to Gain Traction Amid Fed and ECB Policy Divergence<\/p>\n\n
We see EUR\/USD struggling to gain traction around 1.0750 after the minutes from the recent Federal Reserve meeting were digested by the market. The pair is holding steady for now, but underlying support for the dollar from its safe-haven status is keeping any rallies in check. This suggests that selling into strength remains the favored strategy for many.<\/p>\n\n
The Fed minutes confirmed that officials remain worried about persistent inflation, even with the latest June Consumer Price Index (CPI) report showing a slight cooling to 2.9%. With the June Non-Farm Payrolls data last week showing a healthy addition of 195,000 jobs, the Fed has little reason to signal an end to its tightening cycle. Futures markets are now pricing in a 40% chance of one final rate hike by September, underpinning dollar strength.<\/p>\n\n
This contrasts sharply with the European Central Bank, which has signaled it is likely done raising rates amid slowing economic growth in the Eurozone. This policy divergence is a core reason we expect continued downward pressure on the EUR\/USD pair. This fundamental backdrop makes bearish derivative plays, such as buying put options, more attractive.<\/p>\n\n
Looking at the options market, we see one-month risk reversals for EUR\/USD showing a persistent bias for puts over calls. This indicates that traders are actively positioning for, or hedging against, further downside in the coming weeks. Implied volatility remains relatively low, which makes buying these puts a cost-effective way to express a bearish view.<\/p>\n\n
On the charts, the pair remains stuck below its key 50-day moving average, keeping the near-term technical outlook weak. We are watching for a break of immediate support at the 1.0700 psychological level. If that level gives way, it would likely trigger a move down towards the next major support zone around 1.0650.<\/p>\n\n
Any upward bounces will likely face significant resistance, with the first major hurdle for buyers sitting around the 1.0800 area. A strategy of selling call spreads with a strike price at or above that level could be considered to collect premium while the bearish trend holds. We would only begin to reconsider our bearish stance if the pair were to decisively break above the 100-day moving average near 1.0880.<\/p>\n\n
EUR\/USD steadied on Wednesday after paring earlier losses linked to renewed US\u2013Iran tensions, as markets absorbed the June FOMC minutes. The pair was trading near 1.1427 after touching an intraday low of 1.1391. The USD reaction was muted, with the DXY around 100.97 after easing from 101.27, implying the Fed\u2019s guidance was largely priced in. Officials reiterated inflation remains above the 2% target, while judging labour market conditions to be balanced, and they flagged that the interest-rate path will hinge on incoming data.<\/p>\n\n
Technically, EUR\/USD remains inside a downward parallel channel and below key moving averages, keeping the near-term bias bearish. Momentum indicators have improved: RSI rose to 41 from near-oversold territory, and MACD has edged marginally positive, pointing to consolidation within a broader decline. Resistance is seen around 1.1500, then at the 100-day SMA of 1.1611 and the 200-day SMA at 1.1649. Support sits near 1.1350 and then the channel floor around 1.1305.<\/p>\n\n\n\n