Insights 
VT 
The EURUSD aims for 1.1779, the next target, with the yearly high at 1.1829. It declined during the Asian session but rebounded in early European trading. After dipping briefly below the 100-hour moving average, buyer activity saw the pair return to a swing area between 1.1730 and 1.17419.
Weaker US Empire manufacturing data further fuelled the rebound, causing US yields to drop. The 10-year yield fell by 2.3 basis points to 4.0375%, having reached 4.087% earlier. The day’s peak at 1.1772 is close to last week’s high of 1.1779, a short-term barrier.
Potential Barrier Break
A breach of this level may lead to more momentum, targeting July’s highs at 1.1788 and 1.1829, the latter marking the highest EURUSD level since September 2021. The 1.1730–1.1741 area remains a support zone, while 1.1779 is the threshold for further advancement.
The recent push higher in EURUSD is directly linked to signs of a softening US economy, such as the weak Empire manufacturing report. We saw further evidence of this last week when US initial jobless claims ticked up to 235,000, a two-month high. This pattern suggests the Federal Reserve may have less reason to be aggressive, which is putting pressure on the dollar.
Given this upward momentum, we are considering buying call options with strike prices just above the year’s high, perhaps at 1.1850 or 1.1900. One-month implied volatility is currently trading at a relatively subdued 6.5%, making these options more affordable than they were earlier in the year. This strategy positions us for a potentially sharp move higher if the key 1.1829 resistance level is broken.
However, we must respect the 1.1829 level, as it represents a significant barrier that has not been breached since late 2021. The Euro’s strength may already reflect the European Central Bank’s hawkish stance, especially after last month’s Eurozone HICP inflation report came in stubbornly high at 4.8%. Selling call spreads with a short strike around 1.1825 could be a prudent way to collect premium if this resistance holds firm as expected.
Trading Strategies and Risk Management
For traders anticipating a period of consolidation before the next major move, a range-bound strategy could be effective. We could structure an iron condor, selling puts near the 1.1730 support area and selling calls near the 1.1829 resistance. This approach profits from time decay as long as the pair remains caught between these two critical levels in the coming weeks.
Looking ahead, we must be prepared for volatility surrounding the upcoming US inflation data and the next ECB policy statements. Any significant deviation from expectations in these releases could provide the catalyst to either break through resistance or send the pair back down to support. Managing our risk around these key data points will be essential.
