Insights 
VT 
The Euro has weakened, dropping 0.7% against the US Dollar, underperforming all G10 currencies except for the New Zealand Dollar. This is due to a US-EU trade agreement that imposes a 15% tariff on most US imports from the EU.
The announcement affects the European Central Bank’s position, which recently shifted to a neutral stance, moving away from a dovish bias linked to trade uncertainty. Current technical signals show a medium-term bull trend, with EUR/USD trading above the 50-day moving average at 1.1566. Near-term support is at 1.1620, with resistance at 1.1720.
Technical Analysis Of Eur/Usd
EUR/USD is trading lower towards the 1.1650 mark following the trade deal, while GBP/USD also edges lower towards 1.3400 due to US Dollar strength. Gold remains below $3,350 as improving risk sentiment and rising US Treasury bond yields deter buyers.
The upcoming week is expected to be eventful with a trade deadline on August 1, the Federal Reserve likely keeping interest rates unchanged, and anticipated strength in Nonfarm Payrolls. Though showing resilience, there are concerns that the Fed may have delayed rate cuts too long amid labour market concerns.
Given the new 15% tariff and resulting pressure, we believe traders should anticipate further Euro weakness against the US Dollar. Buying EUR/USD put options with strike prices below the 1.1620 support level presents a direct way to position for a continued slide. This move capitalizes on the fresh bearish sentiment introduced by the trade agreement.
The European Central Bank’s recent rate cut in June, its first since 2019, creates a stark policy divergence with the Federal Reserve, adding fundamental weight to our bearish outlook. This is compounded by recent data showing the US economy added a stronger-than-expected 272,000 jobs, reinforcing the dollar’s strength. We therefore see a sustained move towards or below the 50-day moving average as highly probable.
Risk Management Strategies
For those wary of a potential snap-back rally, we suggest using a bear put spread rather than an outright short position. This options strategy limits risk and lowers the upfront cost while still profiting if the Euro depreciates. It is a prudent approach considering the medium-term technical signals still show some underlying bullishness.
The dollar’s dominance is also affecting other pairs, pushing the British Pound lower. Traders could apply a similar strategy by purchasing puts on GBP/USD. This view is supported by historical patterns where broad dollar rallies, driven by US economic outperformance, tend to weigh on most G10 currencies simultaneously.
We would advise against initiating new long positions in gold, which is struggling to hold ground around $2,320 per ounce. The rising US Treasury yields make the non-yielding metal less appealing for investors seeking returns. This dynamic, where a strong dollar and higher yields create headwinds for precious metals, is a well-established market relationship.
The upcoming week’s events, especially the Federal Reserve meeting, are critical checkpoints for this strategy. The CME FedWatch tool shows markets are pricing in a high probability of rates remaining unchanged, so the focus will be on the forward-looking language. Any indication from the central bank that it has delayed rate cuts for too long could further fuel the dollar’s ascent and validate bearish derivative plays on the Euro.
