EUR/USD stayed subdued for a second day, trading near 1.1540 in Asian hours on Friday. The daily chart shows the pair testing the upper boundary of a descending channel, which can point to a bullish reversal.
Near-term bias remains mildly bearish as the price is below the nine-day and 50-day Exponential Moving Averages (EMAs). The nine-day EMA is below the 50-day EMA and is flattening, which suggests limited follow-through after rebounds.
The 14-day Relative Strength Index (RSI) is around 45, indicating soft momentum. This shows sellers have a slight edge without the pair being oversold.
Support is seen at 1.1411, an eight-month low set on 13 March. A further fall could bring a test of the descending channel near 1.1250.
Resistance is around 1.1544 near the nine-day EMA and the channel’s upper boundary. A break higher could lead to 1.1637 at the 50-day EMA, then 1.2082, the highest since June 2021, recorded on 27 January.
We remember looking at the EUR/USD around 1.1540 back in early 2025, when the bearish indicators were just beginning to weigh on the market. The Relative Strength Index was soft around 45, and the price struggled below its key moving averages. That prevailing downside tone ultimately defined the trend for the subsequent months.
Today, with the pair trading near 1.0750, the fundamental picture strongly supports continued weakness. Recent data shows Eurozone inflation for March 2026 falling faster at 2.1% compared to the stickier US inflation rate of 2.9% reported for February. This divergence reinforces market expectations that the European Central Bank is positioned to cut interest rates well before the US Federal Reserve.
Given this outlook, we believe derivative strategies that benefit from a declining or range-bound EUR/USD are prudent for the coming weeks. Buying put options with strike prices around 1.0700 provides a clear, risk-defined way to position for a test of the year’s lows. This strategy capitalizes on the downward momentum driven by the diverging monetary policies between the two central banks.
We must, however, remain watchful of the 1.0820 level, which represents the 50-day moving average and has capped recent rallies. A convincing break above this resistance would signal a potential shift in short-term sentiment, forcing us to reconsider bearish positions. In such a case, traders might use short-dated call options to hedge against an unexpected upward squeeze.
