The EUR/USD pair fell over 0.30% after US President Trump canceled planned tariffs regarding Greenland negotiations. This announcement, made on Truth Social from Davos, Switzerland, boosted risk sentiment. As a result, US stocks rose between 1.16% and 1.21%, and the US Dollar Index increased by 0.20% to 98.75. Upcoming economic reports include US GDP data, jobless claims, and the Core PCE Index. In the Eurozone, we expect the ECB’s policy accounts and consumer confidence data. This week, the Euro weakened against the US Dollar, dropping 0.86%, but gained 1.18% against the Japanese Yen.

Eur Usd Technical Outlook

The technical outlook for the EUR/USD pair indicates it may test lower prices, having dipped below 1.1700, with key support at 1.1662. This currency pair is influenced by factors like GDP, unemployment rates, manufacturing indices, and inflation. Strong economic data can strengthen the Euro by attracting foreign investment and leading to ECB rate hikes. On the other hand, a negative trade balance or weak data may drive the Euro lower. Looking back at 2025, we saw how quickly the market reacted when the former President announced the end of tariff threats related to Greenland. The US Dollar gained strength, and the EUR/USD pair fell below 1.1700. This shows how geopolitical news can impact short-term economic data. The data following these events last year mostly supported a stronger dollar. The final reading for the US Q3 2025 GDP was 2.2%, and the Core PCE inflation for December 2025 ended the year at 2.8%, above the Fed’s target. This suggests that the Federal Reserve has little reason to cut rates soon.

Opportunities for Traders

Meanwhile, the European Central Bank faces challenges. The latest German IFO Business Climate Index dropped to 85.2, raising concerns for the Eurozone’s economy. This growing difference between a strong Fed and a cautious ECB continues to weigh on the EUR/USD exchange rate. For derivatives traders, this situation offers clear opportunities. Last year, we saw one-month implied volatility for EUR/USD spike over 8% during tariff concerns before dropping sharply once the threat disappeared. This trend indicates that selling volatility through strategies like short strangles could be profitable during future politically-driven market movements. Given the fundamental weaknesses in the Eurozone, we should also look at directional strategies. The break below the important 1.1700 level last year was significant, with the 200-day moving average near 1.1590 now being a potential target in the upcoming weeks. Buying EUR/USD put options or creating bear put spreads is a strategy to consider for potential further declines. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now