EUR/USD is consolidating near 1.17 after recent gains linked to easing geopolitical concerns. It entered Friday’s North American session up 0.1% against the US dollar.
Risk reversals have improved, pointing to lower demand for protection against euro weakness. This shift is described as allowing a move back towards fundamental drivers.
Near Term Drivers For Eurusd
Yield spreads are described as supportive for the euro in the near term. This is associated with upside risk for EUR/USD.
Short-term technical signals are bullish, with the RSI above 50. Earlier in mid-March, the RSI fell to near 20.
Resistance is described as limited before 1.18, which previously acted as a congestion area in the second half of February. The expected near-term trading band is 1.1680 to 1.1780.
Looking back at the bullish sentiment from 2025, the situation today is quite different. The euro is currently trading closer to 1.0850, well below the 1.1680–1.1780 range that was anticipated. This suggests that the fundamental drivers have shifted significantly over the past year.
Options Positioning And Trade Ideas
The yield spreads that were once seen as supportive for the euro now favor the US dollar. We see the spread between the US 10-year Treasury and the German 10-year Bund has widened to nearly 200 basis points amid a resilient US economy. This makes holding dollar-denominated assets more attractive for yield-seeking investors.
Recent data reinforces this divergence, with the latest US jobs report in March 2026 showing a robust gain of over 250,000 jobs, keeping the Federal Reserve on a hawkish path. Meanwhile, the European Central Bank has expressed more caution, as March inflation in the Eurozone, while ticking up to 2.6%, is coupled with weaker growth forecasts. This policy difference is putting downward pressure on the EUR/USD pair.
In the derivatives market, the optimism of 2025 has faded, and sentiment has reversed. One-month risk reversals for EUR/USD are now skewed towards puts, indicating traders are paying a premium to protect against further downside in the euro. This is a stark contrast to the softening demand for downside protection we observed last year.
Given this environment, traders should consider strategies that hedge against or profit from further euro weakness in the coming weeks. Buying EUR/USD put options with strike prices around 1.0750 or 1.0700 could be a straightforward way to position for a potential break below the 1.0800 support level. For a more cost-effective approach, we can look at establishing bear put spreads.
