Euro Strengthens Against Swiss Franc
The Euro has strengthened significantly against the Swiss Franc. Meanwhile, the Dollar remains steady due to the nomination of Kevin Warsh, with predictions of at least two rate cuts in 2026. In Germany, retail sales increased by 0.1% in December, which was unexpected since a 0.2% decline had been anticipated. In the US, the ISM Manufacturing PMI is expected to rise to 48.3.
EUR/USD is currently in a downward correction, lingering around 1.1850. Technical indicators suggest it may decline further. The ISM Manufacturing PMI provides insights into the US economy, with a score above 50 indicating growth. The next data release is set for February 2, 2026, with a forecast of 48.5.
The strength of the Dollar is a key factor, influenced by Kevin Warsh’s nomination to lead the Fed. This situation is keeping EUR/USD below 1.1900, despite some positive news from Germany. Attention is focused on the US ISM manufacturing data coming out later today.
We believe the market might be underestimating the resilience of the US economy, similar to perceptions throughout 2025 when a slowdown didn’t fully occur. For instance, the January 2025 nonfarm payrolls showed an unexpected gain of 295,000 jobs instead of the predicted 170,000. A strong ISM reading today would further support this trend of positive surprises from the US.
Market Outlook and Trading Strategies
With the ECB meeting on Thursday and US payrolls on Friday, we’re seeing increased implied volatility. The CBOE EuroCurrency Volatility Index has risen to 8.2, up from nearly 6.5 late last year. Traders might consider buying straddles or strangles on EUR/USD to take advantage of the expected price movements without choosing a direction.
Since the pair struggles to remain above the 1.1830 support level, buying puts may be appealing for those who are bearish. A break below this level could lead to a swift move toward a 1.1770 target. Weekly options expiring after Friday’s NFP report could capture potential downside from the upcoming data.
It’s also important to remember the European Central Bank’s cautious stance, a consistent theme since their last meeting in December 2025. Back then, officials pushed back against aggressive rate cut expectations. Any similar cautious language on Thursday could weigh heavily on the Euro.
If the Euro shows any surprising strength, we view rallies towards 1.1950 as opportunities to initiate bearish positions. Selling call spreads with a strike price at or above 1.2000 can limit risk while betting against a continued recovery. This strategy benefits both from a potential price drop and the passage of time leading up to major events this week.
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