EUR/USD was weaker on Thursday as the expanding Middle East conflict lifted oil prices and strengthened expectations for a more hawkish Federal Reserve, supporting demand for the US Dollar. The European Central Bank kept interest rates unchanged, but the decision generated little reaction in markets. The pair was trading near 1.1379, close to three-week lows, while the US Dollar Index (DXY) hovered around 101.40 after rebounding from an intraday low of 100.94.
Technically, the pair has formed a base above 1.1350, though it remains under pressure below the 21-day Simple Moving Average (SMA) at 1.1415 and the 50-day SMA at 1.1504, with the 100-day SMA at 1.1576 reinforcing a broader bearish set-up. Momentum indicators are mixed: the Relative Strength Index (RSI) is 39, below 50, while the Moving Average Convergence Divergence (MACD) is marginally positive. Resistance levels sit at 1.1415, then 1.1504 and 1.1576, ahead of 1.1700; support is at 1.1350, where a break could extend losses.
Outlook for Derivative Traders Amid Geopolitical and Macroeconomic Pressures
We suggest that derivative traders prepare for continued US dollar dominance in the coming weeks as geopolitical conflicts push energy prices higher. With global Brent crude oil prices climbing toward $88 a barrel, sticky inflation is fueling expectations that the Federal Reserve will keep interest rates higher for longer. This macro pressure is weighing heavily on the Euro, especially after the European Central Bank recently decided to keep its key interest rate unchanged.
Technical Trading Strategies and Key Levels to Watch
From a technical perspective, we favor shorting the EUR/USD pair on temporary relief rallies since it remains capped below its 21-day Simple Moving Average at 1.1415. Persistent bearish momentum is confirmed by the Relative Strength Index sitting at 39, well below the neutral 50 threshold. Traders should consider buying short-term put options or entering short spot positions with protective stops placed just above the 1.1415 level.
We need to watch the immediate support level of 1.1350 very closely over the next few sessions. A clean break below this level could open the floodgates for deeper losses toward the 1.1200 mark, which has historically acted as a major psychological barrier. If the support holds, we should use any minor corrective bounce toward 1.1504 as an opportunity to establish fresh short positions at more favorable prices.
