The Euro (EUR) rose slightly by 0.1% against the US Dollar (USD), but it still lags behind other G10 currencies as we enter Friday’s North American trading session, according to Scotiabank’s Chief FX Strategists. The European Central Bank (ECB) is currently neutral, with no immediate plans to discuss interest rates. Germany’s final Consumer Price Index (CPI) met expectations at 1.8% year-on-year, causing no significant market reactions.

Stability in Rate Expectations

Right now, stable rate expectations may provide some support for the Euro. Upcoming events, like the ZEW sentiment report on Tuesday and preliminary PMI data on Friday, could lead to significant changes in the currency’s direction. The Euro has been trading between 1.15 and 1.19. It briefly fell below the 50-day moving average at 1.1662 but found support at the 200-day moving average of 1.1589. Analysts expect it to stay range-bound between 1.1580 and 1.1680 in the short term. Currently, the Euro is stuck in a narrow range against the dollar, indicating a neutral outlook for the coming weeks. The European Central Bank has reiterated its wait-and-see approach, with no rush to discuss interest rate changes. This has driven implied volatility on EUR/USD options down to multi-year lows, recently hovering around 6.0% for one-month contracts.

Inflation Figures and Strategy

Looking back at the last quarter of 2025, inflation data across the Eurozone did not prompt the central bank to change its stance. For example, the final German CPI for December 2025 matched expectations, showing that price pressures are stable and not rising unexpectedly. This stability is a major reason the currency pair lacks a strong directional influence. In this low-volatility environment with a clear range, selling options premium seems like a smart strategy. We suggest setting up trades that profit from time decay, such as short iron condors with strikes beyond the 1.1580 support and 1.1680 resistance levels. These positions would gain if the EUR/USD continues its sideways movement leading into the February options expiration. However, we should watch for next week’s important data releases that could add movement to the market. Tuesday’s German ZEW Economic Sentiment and Friday’s preliminary PMI figures for the Eurozone will be key events. Any significant surprises in this data could impact the current range and prompt a re-evaluation of short-volatility positions. Create your live VT Markets account and start trading now.

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