EUR/USD edged up for a third day, trading around 1.1550, yet it stayed near two-month lows close to 1.1500 and remained capped beneath the former support area at 1.1575. Risk appetite softened after reports of US strikes on Iran’s defence and radar systems, followed by retaliatory attacks from Tehran on US forces in Bahrain, although reactions in the dollar and oil were described as contained and moderately bearish. Attention later turns to May’s US Consumer Price Index, which is expected to show inflation accelerating to three-year highs, following a stronger Nonfarm Payrolls report on Friday and adding to expectations of tighter Federal Reserve policy.
In technical terms, the pair hovered just above 1.1505, with momentum mildly negative on four-hour charts: the Relative Strength Index sat just below 50, while the Moving Average Convergence Divergence remained in shallow positive territory. A move above 1.1575 would shift focus to the 4–5 June highs near 1.1645 and then late-May highs at 1.1685. On the downside, session lows were near 1.1530, with support at Monday’s 1.1505; below that, attention turns to the 30 March low at 1.1443.
Macro Drivers And Dollar Strength
We see the Euro struggling near two-month lows around the 1.1500 level, with any upward moves being capped below the 1.1575 resistance zone. All attention is now on the May US inflation data, which is due to be released in the next couple of days. The market is positioned for a strong US Dollar, and we are hesitant to bet against it before this key report.
This intense focus is justified, as the jobs report last Friday showed a robust 250,000 new payrolls, crushing expectations. This followed April’s hot year-over-year CPI reading of 3.8%, which has pushed the Federal Reserve into a more cautious corner. Consequently, futures markets now indicate virtually no chance of an interest rate cut in 2026, which continues to support the dollar.
Trading Strategies And Technical Triggers
We believe traders should consider buying puts on the EUR/USD to hedge against or speculate on a further drop below the 1.1500 support level. The implied volatility on short-dated options has increased to a six-week high of 8.5% ahead of the CPI release, making strategies like bear put spreads attractive to manage premium costs. This approach allows for profiting from a downward move while keeping risk clearly defined.
Adding to the dollar’s strength is a general risk-off mood due to renewed tensions in the Middle East, which is increasing safe-haven demand. This environment reminds us of the 2022-2023 period, when persistent inflation forced the Fed to maintain high rates for much longer than the market initially expected. We may be seeing the beginnings of a similar dynamic playing out now.
From a technical standpoint, a decisive break below the 1.1505 support level would be a significant bearish signal. Such a move would likely trigger a cascade of stop-loss orders and could open the door for a swift move down towards the 1.1443 target. We are watching this 1.1505 level as a key trigger for initiating new short positions or adding to existing ones.
