EUR/USD is currently stable around 1.1607 as the US Dollar stays strong in a calm market. The pair remains above the 21-day SMA, and with the upcoming ECB meeting expected to keep rates steady, analysts anticipate a rate cut from the Fed soon. In November, Eurozone consumer prices rose by 2.2% year-over-year, up from 2.1% in October. The Core HICP stayed at 2.4% year-over-year. The technical outlook is positive, although the 100-day SMA limits further gains, so a breakout above that level is necessary for additional upward movement.

Positive Outlook

Momentum indicators show a good outlook, with the RSI above 50 and MACD indicating a positive trend. Upcoming data such as Eurozone’s PPI, PMI, and US’s ADP Employment Change might impact EUR/USD fluctuations. The US Dollar’s performance was mixed against major currencies, being notably strong against the Japanese Yen. This analysis comes from Vishal Chaturvedi, a seasoned macro-focused research analyst at FXStreet. Investors should be cautious, as market analyses carry risks and uncertainties. The information here does not constitute buy or sell recommendations, so thorough consideration is essential for investment decisions. FXStreet and its authors are not registered investment advisors. Due to differing monetary policies, an opportunity is developing in the EUR/USD pair. The market suggests a strong possibility of a Federal Reserve rate cut next week, with fed funds futures indicating an 85% chance of a 25-basis-point reduction. This expectation grew stronger after last week’s Continuing Jobless Claims data for November 2025 hit 1.9 million, the highest number this year.

Diverging Monetary Policies

Meanwhile, the European Central Bank seems set to maintain its current course, especially with Eurozone inflation rising to 2.2%. Since Fall 2025, the ECB has focused on controlling inflation rather than boosting growth. This divide between a dovish Fed and a steady ECB provides support for the Euro against the Dollar. For derivatives traders, this market environment is ideal for bullish strategies in the upcoming weeks. We suggest buying near-the-money call options on EUR/USD set to expire after the ECB meeting on December 18. This strategy allows for potential gains if the pair exceeds the key 100-day moving average and targets the 1.1700 level. To manage risk, we might also think about a bull call spread: buying a call at a lower strike price and selling one at a higher strike price. This strategy limits potential profits but also decreases initial costs, which is sensible due to rising implied volatility of 7.8% ahead of the central banks’ meetings. This setup provides a defined-risk way to position for a potential rise following Friday’s US Personal Consumption Expenditures (PCE) data. Looking back, recent price action reminds us of patterns seen in the second quarter of 2025 when similar policy differences led to sustained gains. Currently, the key support to monitor is the 21-day simple moving average. As long as prices stay above this level, our bullish outlook remains, and we can see any dips towards it as potential opportunities for new positions. Create your live VT Markets account and start trading now.

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