The Euro stays close to the support level of 1.1600, with little movement above 1.1650, mainly due to political issues in France. Investors are looking forward to Federal Reserve Chair Jerome Powell’s upcoming speech, as the US government shutdown is delaying key economic data. The EUR/USD exchange rate is around one-month lows, currently at 1.1615. The ongoing bearish trend is supported by the political uncertainty in France and impending statements from the Federal Reserve, including insights from New York Fed President John Williams about potential monetary easing.

European Central Bank Policy Discussion

Recent talks at the European Central Bank show that there won’t be any immediate policy changes, even with rising global uncertainties. Some policymakers have differing views on inflation risks, which could impact price increases. Economic data presents a mixed picture. Germany recorded a trade surplus of EUR 17.2 billion in August, largely due to a 1.3% decrease in imports. However, the nation also experienced a 4.3% drop in industrial production. A ceasefire agreement between Israel and Hamas may influence market sentiment. Still, the EUR/USD pair continues to face selling pressure, with the Relative Strength Index under 50. Sellers are active near the 1.1650 resistance level, where immediate technical resistance lies between 1.1645 and 1.1650. We are keeping a close watch on the EUR/USD pair as it nears the important support level of 1.1600. The Euro is under pressure from Europe, while the Dollar’s future direction relies heavily on what the Federal Reserve decides next, creating a tense situation for traders in the weeks ahead.

US Economic Outlook

The main pressure on the Euro comes from political instability in France and signs of a slowing German economy. Recent data shows Germany’s IFO Business Climate index dropped to 85.2 in September 2025, marking the third consecutive month of decline. With Eurozone inflation at a low 1.9%, there’s little reason to expect the European Central Bank to step in. In the US, uncertainty is compounded by the government shutdown, which is causing delays in important economic reports. Federal Reserve officials are hinting at a dovish approach, especially as only 130,000 jobs were added in August 2025, which was lower than expected. Everyone is now focused on Powell’s speech to see if more rate cuts are on the horizon. Traders anticipating further European weaknesses might consider buying puts with a strike price below 1.1600 as a direct strategy, allowing profits if the support level breaks down. A bear put spread, where a higher strike put is bought while a lower one is sold, could help reduce the trade’s upfront costs. Given the unpredictability surrounding Powell’s speech, a sharp reversal in the market is possible. Historically, in early 2019, a dovish shift from the Fed resulted in prolonged dollar weakness. For those looking to position for this, buying out-of-the-money call options above the 1.1720 resistance could be a cost-effective way to capture a potential upward breakout. If you believe a significant price move is imminent but are unsure of the direction, a volatility strategy might be appropriate. A long straddle, which involves buying both a call and a put option at the same strike price near 1.1615, would benefit if the pair moves sharply in either direction. This tactic is perfect for taking advantage of the market’s immediate reaction to the upcoming Fed speeches this week. Create your live VT Markets account and start trading now.

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