The EUR/USD is holding steady around 1.1600 after last week’s disappointing US Nonfarm Payrolls report. The Sentix Investor Confidence Index in the Eurozone dropped to -3.7 in August from 4.5 in July, signaling a decline in investor sentiment. Even though the Euro is showing strength against the US Dollar, it faces challenges. There’s criticism regarding a newly announced US-EU trade framework, which many feel favors the US. This raises concerns about the long-term competitiveness of the Eurozone market.

Current Trading Challenges

The EUR/USD pair is trading close to 1.1557. It struggles to break through the 1.1600 level. The lack of new economic news and cautious sentiment are holding it back. US Factory Orders fell by 4.8% in June, reversing an 8.3% increase in May. This suggests a slowdown in manufacturing. The market is currently predicting a 77% chance that the Federal Reserve will cut rates by 25 basis points in September. This move could affect the US Dollar and help support the Euro. The EUR/USD is consolidating near the 1.1600 resistance level after last week’s poor US jobs report, which has increased bets against the dollar. However, negative signals from Europe, such as the Sentix Investor Confidence drop, are preventing significant gains. The market is paying close attention to what the Federal Reserve plans to do next. The July 2025 Nonfarm Payrolls data came in slightly below expectations at 185,000, and now the CME FedWatch tool indicates an 85% chance of a rate cut in September. This rising certainty is likely to keep pressure on the US dollar and encourage buying in the EUR/USD.

European Economic Concerns

The strength of the Euro is also in question. At its July 2025 meeting, the European Central Bank expressed caution due to slowing growth, which supports the poor Sentix reading. The controversy surrounding the new US-EU trade framework is weighing heavily, making traders hesitant to push the Euro much higher. Given the strong resistance at 1.1600, taking a direct long position seems risky. A more suitable strategy for the next few weeks would be to use options, like a bull call spread expiring in late September. This would allow for profits from a modest rise in the EUR/USD while limiting potential losses if it fails to break higher. For those confident about a breakout but unsure of the direction, a long straddle could be a good choice. With the US inflation report for July coming out next week and ongoing discussions from central bankers, implied volatility may rise. Looking back, we saw similar market behavior in late 2019 before a Fed decision led to sharp and unpredictable movements. Create your live VT Markets account and start trading now.

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