The EUR/USD is slightly up at 1.1728, nearing three-week highs. The currency is holding steady after recent gains, as the US dollar weakens before President Trump’s upcoming speech at Davos. The market is sensitive due to Trump’s threats of tariffs against European countries that oppose his Greenland acquisition plans. Investors are hopeful that tensions will ease after the Davos World Economic Forum, despite concerns heightened by Trump’s past actions, such as leaking private communications from European leaders.

Euro Vs Other Currencies

The heat map indicates that the Euro is up 0.17% against the Swiss Franc but down 0.10% against the dollar. Additionally, the European Parliament is discussing the possibility of suspending its trade agreement with the US in reaction to Trump’s threats. Christine Lagarde, the ECB President, is expected to emphasize a consistent monetary policy during her Davos address amid current uncertainties. Economic reports show strong sentiment in Germany, while US job creation remains weak. The EUR/USD has immediate support at 1.1710, with resistance between 1.1761 and 1.1765. The Euro is the second most traded currency, with the EUR/USD making up 30% of foreign exchange transactions. The ECB focuses on price stability through monetary policy, affecting the Euro’s strength. Positive economic data typically boosts the Euro by drawing foreign investment and hinting at possible rate hikes by the ECB. With the high tension surrounding Trump’s Davos speech, the EUR/USD pair is consolidating after a strong surge. The market is taking a cautious approach, with the “Sell America” trend temporarily pausing. This consolidation above the 1.1700 mark is crucial for traders.

Strategies And Insights

Traders should consider buying volatility ahead of the speeches from Trump and ECB President Lagarde. Given the uncertain nature of these geopolitical events, using options strategies like straddles or strangles on EUR/USD could be beneficial. This allows for profits from significant price movements in either direction without predicting the outcome of the Davos discussions. A similar situation occurred during the US-China trade war in 2019, where headline news led to sharp, unpredictable swings in currency markets. At that time, the CBOE Volatility Index (VIX) often went above 20 on tariff announcements, rewarding those prepared for increased market volatility. The current EU situation regarding Greenland appears to be alike, indicating that volatility might be underpriced. Beyond immediate risks, current economic data supports continued Euro strength against the Dollar. The German ZEW survey shows investor sentiment at a four-year peak, contrasting sharply with weak US job figures. A recent ADP report indicates only 8,000 new jobs, significantly lower than the average of over 170,000 seen throughout 2025, reflecting a slowdown in the US labor market. This divergence suggests a medium-term strategy of buying EUR/USD call options or selling out-of-the-money put options, positioning for a potential breakout above the 1.1765 resistance level if Trump’s aggressive rhetoric continues and economic data supports the Eurozone. We believe that fundamental weaknesses in the US combined with a steady ECB present a strong advantage for the Euro. Create your live VT Markets account and start trading now.

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