EUR/USD remains strong, gaining almost 1% over two days, approaching highs of 1.1743. This rise comes after a positive ZEW Economic Sentiment Survey from the Eurozone and Germany, which beat expectations. US President Trump’s announcement of new tariffs on European countries caused a “Sell America” trend, weakening the US Dollar. As markets stay cautious, Eurozone leaders are meeting in Brussels to discuss possible responses.

Improved Economic Sentiment

In Germany, economic sentiment rose to a four-year high of 59.6 in January, up from 45.8 last month. The Eurozone’s sentiment increased to 40.8 from 33.7, exceeding forecasts. The Euro gained nearly 1% against the US Dollar over two days due to worries about US policies. Additionally, the German Producer Prices Index showed a 0.2% drop in December, which was beyond expectations. The final Eurozone Harmonized Index of Consumer Prices for December was adjusted to a 1.9% increase year-on-year, while the core HICP remained at 2.3%. EUR/USD is trading around 1.1720, with technical indicators suggesting continued strength but possible resistance near 1.1740. Data releases, especially inflation and economic indicators, greatly influence the Euro’s value. A strong economy or higher inflation can lead to increased interest rates, attracting foreign investment and boosting the Euro. A positive trade balance also strengthens a currency’s value.

The Euro’s Bright Outlook

The “Sell America” trend is clearly happening now, and we should take advantage of this momentum. The rise in EUR/USD is fueled by political risks against the dollar and unexpectedly strong economic sentiment from Germany. Buying short-term call options on EUR/USD is a straightforward way to capitalize on this trend. This current weakness of the dollar highlights a de-dollarization trend that started building in 2024. Central banks have consistently added over 1,000 tonnes of gold to their reserves each year through 2024 and 2025, moving away from US assets. The new tariff threats are speeding up a process that was already in progress. On the Euro side, the outlook is strong, with the German ZEW sentiment reading at its highest since the recovery in 2021. With Eurozone core inflation stable around the 2% target, which is a big improvement from the volatility of 2023, the ECB is unlikely to disrupt this rally. This gives the Euro a clear path to rise against a weakening dollar. However, as EUR/USD nears the resistance zone of 1.1740-1.1765, which had been a significant ceiling in 2025, the rally may be stretching too far. A bull call spread could be a wise strategy to maintain a position, as it reduces initial costs and defines risk. This approach allows for a movement toward 1.1800 while offering protection against a quick pullback. The President’s upcoming speech at Davos poses a risk that could change the market quickly. Therefore, it’s smart to protect long positions by buying some inexpensive, short-term put options with a strike price near 1.1650. This acts as a small insurance plan if the political situation changes and the dollar sell-off reverses rapidly. Create your live VT Markets account and start trading now.

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