EUR/USD moved back towards 1.1700 in late European trade on Monday, but remained down 0.2% on the day. The rebound stalled near the 50.0% Fibonacci retracement at 1.1750.
Risk appetite weakened after the first round of US-Iran talks failed, following Tehran’s refusal to give up its nuclear ambitions. US President Donald Trump said the US will blockade Iranian ports from April 13 at 10:00 AM ET (14:00 GMT).
Dollar Demand Strengthens
US stock futures pointed to a lower open for the S&P 500. Demand for the US Dollar rose, with the US Dollar Index (DXY) up 0.2% to around 99.00.
Technically, EUR/USD stayed above the 20-day EMA at 1.1611 and the 38.2% retracement at 1.1671. The 14-period RSI was 57.6, above 50 and below overbought levels.
Resistance sits at 1.1750, then 1.1830 at the 61.8% retracement. Support is at 1.1671, then 1.1611, with further levels at 1.1572 and 1.1413.
The current market mood is becoming more cautious, reminding us of past risk-off events like the US-Iran tensions during the Trump administration. We saw then how geopolitical stress directly led to a stronger US dollar as investors sought safety. This historical pattern from before 2025 provides a useful template for what we can expect in the coming weeks of April 2026.
Options Strategies In A Risk Off Tape
Today, with new friction reported in the South China Sea, we are observing a similar flight to the dollar. The CBOE Volatility Index (VIX), a key measure of market fear, has surged to 23.5 this week, well above the first quarter’s average of 17. This move is compounded by last week’s US inflation data, which showed core CPI remaining stubborn at 3.2%, giving the Federal Reserve little reason to soften its stance.
For derivative traders, this points toward strategies that benefit from a declining EUR/USD and heightened market volatility. We saw a comparable situation in 2025 when supply chain disruptions in Europe caused a sharp, though temporary, spike in the dollar’s value. Buying put options on the EUR/USD, or using bear put spreads to offset the higher premiums from increased volatility, could be a prudent approach to target a move lower.
Implied volatility in EUR/USD options has risen, making short-dated contracts for late April and May particularly responsive to price swings. The pair is currently struggling to hold above the 1.0680 level, a key technical support zone from earlier this year. A firm break below this could create a path towards the 1.0550 mark, a level not seen since the fourth quarter of last year.
