The Euro is expected to trade between 1.1640 and 1.1700. Recently, its weakness has stabilized, and analysts from UOB Group predict it will consolidate between 1.1615 and 1.1730. In the last 24 hours, the Euro was expected to hover between 1.1615 and 1.1665. However, it bounced back unexpectedly, reaching a high of 1.1698. This quick rebound seems too fast, and significant upward movement is not anticipated soon. Over a one-to-three-week period, the Euro fell to a low of 1.1617 last Friday. Analysts noted that it needed to close below 1.1615 to move towards 1.1585. Instead, the Euro climbed above the strong resistance at 1.1690, hitting a peak of 1.1698. This suggests that the earlier decline has stabilized, moving the Euro into a consolidation phase. It will likely continue trading between 1.1615 and 1.1730. Looking back to early last year, it was clear that downward pressure on EUR/USD had eased. This stabilization hinted at a shift into a consolidation phase, making it a good time to consider selling volatility. Thus, we expected the pair to trade between 1.1615 and 1.1730 in the coming weeks. At that time, the macroeconomic environment supported this view. The European Central Bank and the US Federal Reserve both signaled a pause in rate hikes, reducing currency volatility. This created a situation where neither the euro nor the dollar had a strong momentum driver. Inflation data also backed this outlook. By December 2024, Eurozone HICP inflation had dropped to 2.8%, while US CPI was down to 3.1%. These lower numbers lessened the pressure on central bankers to make sudden moves, further supporting a stable market. For traders using derivatives, the strategy was to sell short-dated option strangles or iron condors. This approach benefits from low volatility and time decay, which was ideal if we believed the pair would remain within the 1.1615-1.1730 range. In January 2025, the one-month implied volatility of EUR/USD fell below 6%, making option premiums attractive to sell. The breach of the 1.1690 resistance was a crucial trigger that led us to stop looking for further downside. This technical shift confirmed the consolidation phase, allowing us to feel confident that selling puts below 1.1600 would be relatively safe for collecting premium. The idea was to let the options expire worthless as the currency pair remained in the expected range.

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