EUR/USD dropped over 0.28% as new data showed slowing growth in the Eurozone services sector. German inflation fell below 2%, suggesting that the European Central Bank’s easing phase is mostly over. The EUR/USD pair fell to 1.1690 after reaching 1.1742 earlier in the day. Traders largely ignored geopolitical risks related to recent US actions in Venezuela.

US Purchasing Managers Indices

In December, the US Purchasing Managers’ Indices showed a decrease from the previous month. Richmond Fed’s Thomas Barkin pointed out various risks, noting that the current policy rate is now within the neutral range. The Eurozone services sector is slowing down, and German inflation is now below the ECB’s 2% target. This indicates that the ECB might pause its easing unless economic conditions worsen. Looking ahead, the European Union’s economic calendar will include the EU Harmonized Index of Consumer Prices for December and German retail sales data. In the US, attention will focus on the ADP Employment Change, ISM Services PMI, and JOLTS Job Openings. The US Dollar Index rose by 0.25%, but this did not impact Gold prices. Year-over-year German HICP data fell from 2.6% to 2%. December’s Eurozone PMI declined to 52.4 from 53.1 in November.

The Euro and Global Trade

The Euro is the currency for 20 countries in the Eurozone. It is the second most traded currency in the world, following the US Dollar, making up 31% of forex transactions in 2022. At the end of 2025, a clear divide emerged between a slowing Europe and a stronger United States. This was confirmed by Germany’s inflation dropping below 2% and weakened Eurozone PMIs. The EUR/USD pair falling below the key 1.1700 mark reflects this growing divide. In the first week of January, recent data supported this trend. The preliminary estimate for Eurozone HICP in December 2025 was 1.9%, suggesting the European Central Bank may stay on hold for a while. Meanwhile, last week’s US JOLTS data showed job openings fell slightly to 8.3 million, indicating a slowdown but not a major economic downturn. Given the continued pressure, we may want to explore strategies that benefit from further declines in the EUR/USD. Buying puts with strike prices around the 100-day moving average near 1.1660 is a straightforward way to capitalize on this trend. A more cautious approach could involve establishing bear put spreads to limit costs while aiming for a decline toward the 200-day average at about 1.1550. We should also expect increased market fluctuations in the coming weeks. The US economy is slowing but remains stable, creating uncertainty about the timing of any potential Federal Reserve rate cuts in 2026, as mentioned by officials like Miran. This environment suggests that implied volatility may be relatively low, making long volatility positions a smart move to protect against sudden changes after key US data releases. On the upside, significant resistance has formed around the 1.1700 to 1.1730 range. This area, which includes the December 20-day moving average, presents opportunities for income-generating strategies. We could consider selling out-of-the-money call spreads with strikes above 1.1750 to collect premium, betting on short-lived rallies. Create your live VT Markets account and start trading now.

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