The Euro is trading near two-month lows at around 0.8700 after struggling to maintain gains at 0.8740. In the typically quieter year-end market, the Pound is performing better than the Euro. The EUR/GBP pair had a brief recovery earlier in the week but faced resistance before reaching 0.8740 and then dropped during the European session. The Euro is currently at 0.8710, just above its two-month low of 0.8705.

Technical Indicators Mixed

On the 4-hour chart, technical indicators are mixed. The Moving Average Convergence Divergence (MACD) shows slight positivity, while the Relative Strength Index (RSI) is at 41, not able to break above 50. Support is found at 0.8707, while resistance sits around the 0.8740 level. The Euro faces pressure from the lack of big news from the Eurozone, ongoing tensions in Ukraine, and the issues between China and Taiwan. Even though the Euro shows some strength, the overall downtrend continues until it can break through the 0.8740 resistance. Today, the Euro shows mixed movements against major currencies, performing best against the New Zealand Dollar. It fell by 0.07% against the US Dollar but rose 0.14% against the Pound. As the EUR/GBP pair approaches the two-month low near the 0.8700 support level, there is a clear bearish sentiment for the Euro. The inability to stay above 0.8740 indicates that sellers are in control during these thin holiday trading conditions. This weakness could present an opportunity for traders looking for further declines.

The Pound’s Relative Strength

The Pound’s strength comes from recent economic data, which appears stronger than that of the Eurozone. For example, UK inflation in November 2025 was 2.9%, slightly below expectations, while the Eurozone’s preliminary December rate stayed high at 3.2%. This difference lessens the need for possible rate cuts from the Bank of England compared to the European Central Bank. Geopolitical tensions impact the Euro more severely, as the Eurozone is vulnerable to energy markets, especially due to the situation in Ukraine. Recently, European natural gas futures (TTF) rose 6% in two weeks due to stalled negotiations, a situation that poses less risk to the UK economy. This external pressure helps explain why the Euro is struggling. For traders in derivatives, this scenario suggests buying put options with a strike price below the 0.8700 support level, possibly targeting 0.8670 in the coming weeks. Given that trading volumes typically drop by 35% in the last week of the year, any break of this key support could be sharp. This makes puts a smart choice to take advantage of a potential decline while managing risk. However, it’s essential to keep an eye on the 0.8740 level as a significant resistance. A clear break above this point would change the current bearish outlook. Traders might consider selling out-of-the-money call options near 0.8775 to generate income, anticipating that the pair’s upside is capped for now. With technical indicators showing limited momentum, the market may consolidate before making its next big move. Still, the easiest path seems to be downward. Therefore, it’s wise to set up trades that can benefit from gradual declines or quick breaks lower as liquidity returns in early January 2026. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now