The euro has drawn fresh buying interest around 1.1730-1.1725, successfully paring Monday's opening bearish gap and holding just above the mid-1.1700s. As per FXStreet analysis, this recovery has unfolded as the pair attempts to stabilize after the recent retreat, with buyers stepping in at lower levels while facing key technical constraints overhead. EUR/USD is trading just above the 23.6% Fibonacci retracement of the latest move higher from the late March low, while remaining capped by the 100-hour Exponential Moving Average. The technical backdrop shows RSI near 43 and a slightly negative MACD, indicating consolidation with a mild downside bias rather than a clear bullish setup.
Hedge funds and asset managers are significantly increasing bearish dollar positions through options trading, according to Bloomberg reports. Trading in euro-dollar options jumped by nearly 60% on Friday, while demand for euro calls, which profit from gains in the shared currency, outpaced puts by about 30%. The volume of call options on the Australian dollar, considered a barometer of risk sentiment, was more than 50% that of puts on both Friday and Monday. This surge in options activity indicates institutional investors are positioning for continued dollar weakness, with the euro benefiting from renewed institutional interest.
The dollar has struggled to extend its modest intraday advance to a one-week peak as waning expectations for further interest rate increases by the US Federal Reserve limit follow-through buying. According to FXStreet, this softening in policy-tightening bets serves as an important tailwind for EUR/USD. However, tensions between the United States and Iran around the Strait of Hormuz keep geopolitical risks elevated, potentially underpinning safe-haven interest in the greenback. The dollar's inability to maintain its recent highs reflects the complex interplay between monetary policy expectations and geopolitical uncertainties.
From a technical standpoint, EUR/USD is trading just above the 23.6% Fibonacci retracement at 1.1754, with immediate support at the 38.2% level near 1.1695 and the 50% retracement around 1.1648. As reported by FXStreet, immediate resistance is aligned with the 100-hour EMA at 1.1770, with a sustained move above this barrier potentially exposing the recent cycle peak at 1.1849. Implied volatility — a measure of expected future movement — has remained relatively low for most currency pairs, making buying outright US dollar put or put spreads very cheap according to RBC Capital Markets. This low volatility environment continues to attract institutional investors to bearish dollar positions.
According to Nomura International senior foreign-exchange options trader Sagar Sambrani, US-dollar-weaker flows have been in focus since the de-escalation in the Middle East. "The euro, Australian dollar and Canadian dollar have been the preferred currencies for this play," Sambrani stated. The euro's current strength reflects its status as a preferred alternative to the declining dollar, with institutional investors continuing to favor these currencies amid the ongoing dollar weakness trend.
