The Euro has dropped further, falling below the 1.1600 level as traders lower expectations for a US Federal Reserve rate cut. This decline is influenced by rising tensions between China and Japan, which has made investors more cautious. The EUR/USD pair began the week facing pressure, retreating towards 1.1600 from highs above 1.1650. With the market on edge, upcoming US economic data is boosting the US Dollar.

Concerns in the Eurozone

The Vice President of the European Central Bank is optimistic about Eurozone inflation nearing its targets but has warned of potential risks from tariffs and debt. In a related move, US President Trump has lifted tariffs on more than 200 products, acknowledging inflation concerns linked to import costs. Soon, we expect to see the Eurozone Economic Growth Forecasts and the US Empire State Manufacturing Index. Several Federal Reserve officials will also speak. Current data shows mixed results for major currencies against the Euro, with the Euro performing well against the Australian Dollar. The New York Empire State Manufacturing Index is likely to show worsening business conditions, and construction spending continues to fall. Technical analysis indicates that the EUR/USD pair is under pressure, with signs of possible further declines. The Euro remains weak against the Dollar, staying below the 1.1600 mark as market caution grows and investors reduce bets on a near-term Fed rate cut. Today’s manufacturing and construction data from the US will be crucial for determining the market’s direction. Investors are clearly favoring the Dollar’s safety amid rising geopolitical tensions between China and Japan.

Market Strategies

This perspective aligns with the latest US inflation data from October 2025, revealing a Consumer Price Index steady at 3.4% year-over-year. This persistent inflation keeps the Fed from hastily easing monetary policy, resulting in a reduced probability of a December rate cut to just 43%. In contrast, recent economic signals from the Eurozone have been disappointing. The latest flash manufacturing PMI for November 2025 dropped to 45.2, reflecting ongoing contraction in the sector. This economic divergence is similar to what occurred in 2022, when aggressive Fed tightening led to a stronger Dollar against the Euro. This situation reinforces the current bearish outlook for the EUR/USD pair. Due to the weakening technical momentum, it may be wise to buy EUR/USD put options to prepare for a potential drop. Strike prices around 1.1550 or 1.1500 could be effective if strong US data leads the pair below its current support levels. This strategy allows us to benefit from a move towards the lows seen earlier this month. Alternatively, for those who believe the pair will stay within a specific range, selling call options or creating bear call spreads with strikes above the 1.1670 resistance level is a solid approach. This strategy enables us to collect option premium while betting that the pair will remain within its bearish trend. The upcoming series of speeches from Fed officials may add volatility, making these premium-selling strategies more appealing. Create your live VT Markets account and start trading now.

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