The Euro is slowly gaining value, thanks to short-term spreads that are keeping yields in the Eurozone and the US low. While recent increases are promising, traders are cautious about pushing the Euro higher until they see the upcoming Q3 GDP data. They are particularly concerned about weak German numbers due to a -0.3% result in Q2. The Euro has risen for five straight days, but the gains are small and remain within recent limits. If the Euro rises above 1.1665/70, it may lead to further growth and a possible retest of the previous high at 1.1728. Although the Euro is moving up for the fifth day, the increase is weak as it nears the 1.08 level. This cautious attitude makes sense with important Q3 GDP figures for Germany and the Eurozone expected this Thursday. Traders are reluctant to push the currency higher without seeing this data first. This situation feels familiar, resembling a pattern from late 2021 when the Euro struggled around the 1.16 mark. Back then, traders worried that a weak German GDP report could end a potential rally. The market’s memory from that time suggests we may see similar caution today. The Euro’s strength is supported by the narrowing yield gap between the US and the Eurozone. The difference between US and German 2-year government bonds has shrunk to just 40 basis points in October 2025, down from over 70 basis points last month. This change comes as US inflation has softened to 2.5%, while Eurozone inflation remains stubbornly high, above 3%. For derivative traders, this slow upward trend with a key risk event approaching suggests using options to manage risk. A bull call spread could be a smart way to prepare for a limited move above the 1.0850 resistance if the GDP data is positive. This strategy controls both profit potential and, importantly, the initial cost and risk. On the flip side, if the German Q3 GDP results confirm the weakness seen in their -0.1% contraction in Q2 2025, the Euro could drop quickly. Traders anticipating negative surprises should think about buying inexpensive out-of-the-money put options below the 1.07 level. This approach offers a low-cost way to profit from a sharp decline.

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