EUR/USD traded near 1.1905 on Tuesday. It was little changed and stayed close to one-week highs after rising for two days. The US Dollar remained weak ahead of key US data releases, while overall market sentiment was mildly risk-on. Concerns about US employment continued after last week’s weak jobs report. White House adviser Kevin Hassett said job growth could slow in the coming months due to migration policies and higher productivity. Traders were also looking ahead to January Nonfarm Payrolls (NFP) on Wednesday.

Eurozone Inflation And ECB Rate Outlook

In Europe, ECB President Christine Lagarde said inflation is expected to settle around 2% over the medium term. Recent ECB guidance also pointed to stable interest rates in the months ahead. The Eurozone data calendar was light, so attention shifted to US releases, including Retail Sales and the ADP 4-week average. These reports could shape expectations ahead of Wednesday’s NFP. CME FedWatch pricing showed a 17% chance of a Fed cut in March and 34% in April, with June near 75%. Markets also priced odds above 70% for at least one additional cut before year-end. US Retail Sales were expected to rise 0.4% in December (after 0.6% in November). Sales excluding autos were forecast at 0.3% (after 0.5%). On the technical side, resistance was near 1.1925 and 1.1970. Support sat at 1.1895, 1.1834, and 1.1820. RSI was near 60, and MACD stayed positive.

Looking Back At The 2025 Rate Cut Narrative

In our analysis at this point in 2025, EUR/USD was moving toward 1.19. The main drivers were a weak dollar and growing expectations for Federal Reserve rate cuts. Markets were pricing about a 75% chance of a cut by June 2025, supported by signs of a softer US jobs market. That view helped set the stage for a strong euro rally. That forecast largely played out. January 2025 NFP came in below expectations, and the Fed cut rates twice by autumn. The widening policy gap helped push EUR/USD to a peak near 1.23 in Q3 2025. However, US inflation stayed higher than expected—above 3.5%—which led the Fed to pivot back toward tighter policy late last year. As of February 10, 2026, the picture has flipped. US inflation is at 3.1%, still above the Fed’s target, while Eurozone inflation has eased to 2.8%. The latest US jobs report (January 2026) showed a strong gain of 353,000 jobs, reducing near-term recession concerns. For derivatives traders, this suggests the bullish euro trend that started early last year has ended. With the Fed now more focused on fighting inflation than the ECB, options strategies may favor a stronger dollar. Traders could consider buying EUR/USD puts or selling call spreads to position for a move back toward the 1.0700 area seen in late 2025. The change from last year is clear. The CME FedWatch Tool now shows the chance of a Fed cut in March 2026 at under 20%. Combined with solid US economic performance, this points to a potential rise in implied volatility. Traders may want to position for EUR/USD to stay range-bound or drift lower in the weeks ahead. Create your live VT Markets account and start trading now.

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