EUR/USD moved up as the US Dollar weakened after possible foreign exchange action by Japan to support the yen. EUR/USD traded near 1.1726, up about 0.42%, while the US Dollar Index was around 98.16, down about 0.80%.
The ECB kept all three policy rates unchanged. It said Middle East tension is lifting energy prices, which raises inflation and weighs on growth, while it aims for 2% inflation over the medium term.
Inflation Pressures Return
Preliminary data showed April HICP inflation at 3% year on year, up from 2.6% in March and the highest since September 2023. Energy prices were a main driver.
On the daily chart, EUR/USD stayed above the 200-day SMA at 1.1676 and traded below the 50% Fibonacci level at 1.1747. RSI (14) was 54.4, MACD was slightly negative, and ADX was near 22.2.
Resistance sits at 1.1747, then 1.1826 and 1.1924. Support is at 1.1676 and 1.1667, then 1.1555 and 1.1411.
The report was corrected on 30 April at 18:33 GMT to state the move occurred on Thursday, not Tuesday.
Shifting Macro Backdrop
Looking back at the situation in April 2025, we see the EUR/USD was consolidating above its 200-day moving average, struggling to break the 1.1747 resistance level. The market was weighing a hawkish ECB against a dollar weakened by potential Japanese intervention. That period of cautious optimism for the Euro seems to have shifted significantly over the past year.
The fundamental picture has now changed. Recent Eurozone manufacturing PMI data released for April 2026 came in at a contractionary 48.9, below forecasts and raising concerns about regional growth. This contrasts sharply with the United States, where the latest non-farm payroll report showed a robust addition of 205,000 jobs, reinforcing the Federal Reserve’s stance on maintaining higher interest rates for longer.
This growing policy divergence between a potentially slowing ECB and a steady Fed suggests downside risk for the pair. We believe traders should consider strategies that benefit from or hedge against a fall in EUR/USD. This could involve buying put options or establishing bear put spreads to define risk while positioning for a move lower.
The implied volatility for EUR/USD options has been climbing, recently hitting a three-month high of 9.2%, indicating the market is pricing in larger price swings. This makes selling premium through strategies like bear call spreads potentially attractive for those with a moderately bearish view. We should be cautious, as higher volatility also increases the cost of buying options.
We remember the sharp decline in the Euro during the 2022 energy crisis, which showed how sensitive the currency is to economic shocks and policy divergence with the US. While the situation is different now, that historical precedent serves as a reminder of how quickly sentiment can turn against the Euro. This supports a defensive posture on the pair in the weeks ahead.
