EUR/USD closed the week around 1.1640, down 0.7% as the US Dollar performed better. Although Eurozone Retail Sales were better than expected, the Euro couldn’t shift the focus from the influence of the US market. US economic data was mixed. December’s Nonfarm Payrolls added only 50,000 jobs, which was below the anticipated 60,000. Although the US unemployment rate fell from 4.6% to 4.4%, housing data showed weakness with declines in Building Permits and Housing Starts.

Eurozone and US Economic Indicators

In the Eurozone, Retail Sales rose by 0.2% in November. German Industrial Production exceeded expectations, but the trade balance decreased due to lower exports. Next week will feature speeches from central bank officials, investor confidence indices, and inflation data from both Europe and the US. The Euro fell against many currencies, ending 0.78% lower against the USD, with mixed results against others. Technical analysis suggests a downward trend for EUR/USD, with important support at 1.1600 and resistance at 1.1700. The Euro remains weak due to US economic factors, and upcoming indicators may further impact its movement. The US Dollar remains dominant, pushing EUR/USD below key technical levels, including the 50-day and 100-day moving averages. With the pair closing near 1.1640, the trend appears to be leaning downwards. Attention is now on forthcoming inflation data from both the US and Eurozone to validate this direction.

Options Strategies and Market Volatility

Given the mixed signals from last month’s US jobs report and major inflation releases on the way, increased market volatility is likely. We should consider using options strategies that can benefit from sharp price changes, such as straddles or strangles, focused around the 1.1600 level. This strategy allows us to profit from significant movements in either direction once the new inflation data is released. Looking back to late 2025, core inflation remained stubbornly high, with US Core CPI at about 3.9% year-over-year, well above the Fed’s target. If this week’s US CPI figures are higher than expected, it could challenge the market’s current expectation of 50 basis points in Fed rate cuts this year. This situation may strengthen the dollar further, putting pressure on the 1.1565 support level. On the other hand, we need to watch the European Central Bank closely. Recent Harmonized Index of Consumer Prices (HICP) data from the Eurozone showed a flash estimate of 2.9% in December 2025, up from November’s 2.4%, indicating inflation isn’t completely under control. Any hawkish comments from ECB speakers this week could help support the Euro, especially if US inflation data comes in lower than expected. For traders expecting a continued downward trend, buying put options with a strike price below 1.1600 could be a straightforward way to play a break of this psychological support. On the contrary, purchasing inexpensive out-of-the-money call options above the 1.1730 resistance offers a cost-effective bet on a significant upside surprise, possibly triggered by unexpectedly weak US CPI figures that heighten Fed rate cut expectations. Implied volatility for EUR/USD options is likely to rise as we approach this week’s data releases. Traders who believe that the market is overestimating potential price swings could consider strategies like iron condors to sell volatility. This approach would profit if the pair remains within a relatively narrow range after the economic numbers are announced. Create your live VT Markets account and start trading now.

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