The EUR/USD currency pair has moved above the top of a downward channel, continuing its upward trend, with support set at 1.1550. Analysts from Société Générale note that momentum is building towards a target of 1.1730. Recently, EUR/USD held steady above an upward trend line from August and has gradually broken through the upper limit of the descending channel. Short-term support stands at 1.1550. If this level holds, the pair could rise towards 1.1730 and the multi-month resistance area near 1.1800/1.1830. With EUR/USD breaking out of the descending channel, we see a strong signal that upward momentum is strengthening. In the near term, defending the 1.1550 support level is crucial. As long as the price stays above this point, the trend seems likely to move higher. This technical breakout aligns with fundamental data showing a stronger euro against the dollar. Last week, the Eurozone’s CPI for November 2025 was higher than expected at 3.1%, while the latest U.S. Non-Farm Payrolls report indicated slower job growth. This contrast suggests the European Central Bank may adopt a more aggressive stance compared to a U.S. Federal Reserve that might be nearing a shift in policy. As central bank meetings approach next week, we expect policy differences to drive the pair. The market anticipates a strong anti-inflation message from the ECB, while the Fed is expected to signal a pause. This environment supports a positive outlook for the euro. For traders, this presents a clear chance to position for a move towards the 1.1730 target. Buying call options with a January 2026 expiration and a 1.1700 strike price provides a simple way to tap into potential gains. This strategy limits risk to the premium paid while allowing for substantial gains if the upward trend continues. Alternatively, selling cash-secured puts at or just below the 1.1550 support level is another good approach. This lets us earn premium, based on the belief that this key support will hold in the coming weeks. If the price drops, we would acquire the currency pair at a level we believe is a strong technical support. We have also noticed that implied volatility in the FX options market has increased leading up to next week’s central bank announcements. The Deutsche Bank Currency Volatility Index (CVIX) has risen from a low of 6.8 to 8.2 over the last month. While this makes options more costly, it also indicates the market expects significant movement. This situation is reminiscent of what happened in 2022 when aggressive Fed policies pushed the dollar higher while the ECB lagged behind. Now, at the end of 2025, the roles seem to be reversing, providing a steady boost for EUR/USD that we haven’t seen for several quarters. The main challenge will be the multi-month resistance zone around 1.1800/1.1830.

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