The EURUSD continues its upward trajectory, reaching a session peak at 1.1860, an increase of 0.84% for the day. The price surpassed the previous yearly high of 1.1829 set in July, marking its strongest point since September 2021.
As the upward trend holds, the next target is the double swing highs from August 2021, around 1.1909, which lies approximately 50 pips away. The 1.1829 mark now serves as immediate support, while a lower risk level is noted at 1.1788 from the July 24 high.
Potential Risks And Market Reactions
If the pair slips below these supports, it could trigger disappointment among buyers, leading to profit-taking or new selling pressure. Simultaneously, USDJPY decreased by 0.67%, whereas USDCHF, the weakest performer, fell 0.99% to the lowest rate since 2011 at 0.78714.
The AUDUSD reached new highs, testing trend lines from 2024 near 0.6687 with recent highs at 0.6684 and 0.6694.
Given the EURUSD breakout, we see a clear opportunity to position for more upside in the weeks ahead. Buying call options with a strike price near the 1.1909 target seems logical, especially for contracts expiring in October 2025. The momentum is strong, with the pair now at its highest level since September 2021.
This move is supported by a broader weakness in the US dollar, which we believe is tied to recent economic data. Last week’s US CPI report for August came in at 2.8%, below forecasts and fueling speculation that the Federal Reserve will hold rates steady through the end of the year. This contrasts with the European Central Bank, which has signaled it is in no rush to cut rates, creating a favorable policy divergence for the euro.
Risk Management And Market Opportunities
To manage risk, we can use the old resistance at 1.1829 as a key level. A decisive drop below this point would signal the breakout has failed, and we would consider selling our calls or buying protective puts. Historically, failed breakouts like this can lead to sharp, swift reversals as disappointed buyers exit their positions.
The dollar’s weakness is not isolated, as the USDCHF pair has plunged to its lowest point since the major currency interventions of 2011. This confirms the powerful selling pressure on the dollar and suggests we should also look at buying put options on USDJPY and USDCHF. The breakdown in the Swiss franc pair, in particular, points to a significant, long-term shift away from the dollar.
We are also watching the AUDUSD, which is testing a key trend line and highs from back in 2024. A sustained break above the 0.6700 level would be another confirmation of the weak dollar trend, opening the door for further gains. This widespread dollar decline marks a significant change from the strong-dollar environment we saw during the aggressive rate-hiking cycle of 2022 and 2023.
