Key Moments
- EUR/USD held the 1.1500 support level as options markets did not position for a sharp downside break.
- OIS forwards indicate roughly a 50bp average rate move across G10, with EUR ESTR up 65bp and GBP OIS up 80bp versus a 25bp rise in US rates.
- ING identifies 1.1650 as initial EUR/USD resistance, with further upside seen as contingent on ceasefire developments.
Support at 1.1500 Holds Despite Selling Pressure
ING’s Chris Turner notes that EUR/USD remained above the 1.1500 level after coming under pressure, as market dynamics ultimately kept the pair supported. According to him, FX options activity signaled limited conviction about a sharp move lower even when the spot rate was under strain earlier.
Turner explains that one-month risk reversals – defined as the premium of an EUR put option over an EUR call option – became less supportive of downside protection, with demand for EUR puts softening. This shift suggested that options traders were not aggressively positioning for a substantial decline below 1.1500.
Energy Shock Drives Divergent Rate Moves
Turner comments that once the immediate volatility from the energy shock subsides, there will be more scope to analyze how interest rate markets have adjusted. Using the OIS forwards market, and specifically the one-month OIS contract priced one year forward, he highlights that the average response across G10 markets has been an increase of around 50bp.
Within that broad move, he points out that US interest rates have risen by 25bp. This reflects the view that the energy shock may not exert as pronounced an influence on US inflation. In contrast, the reaction in Europe has been more pronounced, with EUR ESTR marked 65bp higher and GBP OIS up by 80bp.
| Market | Rate Measure | Change |
|---|---|---|
| G10 (average) | One-month OIS priced one year forward | 50bp increase |
| United States | US rates | 25bp increase |
| Euro area | EUR ESTR | 65bp increase |
| United Kingdom | GBP OIS | 80bp increase |
Implications for EUR:USD Swap Differentials and FX Levels
Turner argues that if the lasting impact of the oil shock is a further narrowing in EUR:USD two-year swap differentials, the 1.1500 area in EUR/USD could emerge as a more resilient support zone. In this context, relative rate adjustments would favor a firmer floor for the currency pair.
ING identifies 1.1650 as the first notable resistance level for EUR/USD. Turner adds that there is no clear reason for the pair to extend gains significantly in the near term unless there is “some material progress towards a ceasefire.”
Technical Levels in Focus
With support at 1.1500 having held and initial resistance marked at 1.1650, the current trading framework for EUR/USD, as outlined by ING, hinges on how markets continue to process the energy shock and evolving geopolitical developments. The behavior of short-dated rate expectations and swap spreads remains central to the outlook.
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