The EUR/USD pair rose slightly to 1.1755 in early trading on Friday. It remains above the 100-day EMA, staying on a positive path. The European Central Bank (ECB) kept interest rates steady and took a cautious stance, which boosted the Euro. Meanwhile, there are expectations of changes in US policies that could impact the Dollar. From a technical perspective, the EUR/USD remains in a strong position, trading above the 100-day EMA at 1.1635 with a Relative Strength Index (RSI) of 59.8. The Bollinger bands show moderate volatility. Resistance is at the upper band around 1.1820, and support is at the lower band near 1.1655, indicating a tendency to rise.

The Euro’s Global Importance

The Euro is used by 20 countries in the EU and is the second most traded currency worldwide. In 2022, it made up 31% of forex transactions, with EUR/USD being the most popular trading pair. The ECB sets monetary policy for the Eurozone, adjusting interest rates to control inflation and promote growth, which in turn affects the Euro’s value. Eurozone inflation is measured by the Harmonized Index of Consumer Prices (HICP). Rising inflation rates often prompt ECB actions. Economic indicators like GDP and Purchasing Managers’ Index (PMI) influence the Euro’s strength; economies performing well typically support the Euro. Additionally, a positive trade balance can strengthen the Euro by increasing demand for it. Currently, with EUR/USD around 1.1755, the outlook is positive, suggesting further advances in the coming weeks. There’s a noticeable difference between the ECB’s steady stance after the December 2025 meeting and the uncertainty surrounding the US Federal Reserve. This scenario indicates a strategy of buying during any short-term drops.

ECB Strategy and Dollar Concerns

The ECB’s strategy of relying on data seems well-founded, especially with the latest preliminary estimate for Eurozone inflation in December 2025 rising to 2.9%. This persistent inflation makes rate cuts less likely soon, providing solid support for the Euro. As a result, the Euro’s position seems stable to strong. In contrast, the dollar is facing challenges due to speculation about who will succeed Fed Chair Powell later this year. We recall how similar political pressures on the Fed in 2018 led to market volatility, shaking confidence in the dollar. This uncertainty regarding Fed independence may continue to affect the greenback until a clear direction is established. Given the current upward trend and the price holding above the 100-day moving average near 1.1635, buying call options with strike prices above the 1.1820 resistance could be a smart move. Recent CFTC data shows an increase in speculative net long positions, aligning with this positive technical outlook. Selling out-of-the-money puts might also be a viable option to earn premiums while expressing this bullish sentiment. Create your live VT Markets account and start trading now.

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