The Euro (EUR) is leading among G10 currencies, gaining 0.3% as we begin Monday’s North American session, only trailing the Japanese Yen (JPY). In manufacturing, Germany’s PMI stands at 48.2, and France’s is at 47.8, both slightly under the neutral mark. However, the European Central Bank’s (ECB) steady policy supports the EUR.

Yield Spread Insights

The 2-Year yield difference between Germany and the US is close to a 14-month peak. Preliminary consumer price index (CPI) data for the euro area is expected on Tuesday, and twelve ECB officials will speak, possibly influencing views on inflation risks. The EUR has risen above its 50-day moving average of 1.1617 for the first time since mid-October, closing above this level previously in early October. The relative strength index (RSI) shows a positive trend, nearing 60, with resistance levels expected around 1.1650, 1.17, and 1.1750. The short-term trading range is projected to be between 1.1580 and 1.1680. As we move into the month, the Euro shows remarkable strength, gaining against nearly all major currencies. This rise has pushed EUR/USD above its 50-day moving average of 1.1617, marking the first time since mid-October. This positive trend suggests traders may soon test the resistance levels. The weak manufacturing data from Germany and France has not significantly impacted the market, as attention has shifted to central bank policies and the yield gap between Germany and the US. The 2-year Germany-US yield spread remains near a 14-month high, boosting the Euro’s appeal.

Euro’s Path Forward

Tomorrow’s preliminary Euro area CPI data will be key to assessing inflation. Recent estimates from Eurostat showed core inflation stubbornly above the ECB’s target at 2.7% for October 2025. A high reading could reinforce expectations that the ECB won’t signal rate cuts soon. Given the positive momentum and clear technical levels, traders might consider cautiously optimistic options strategies. Buying call options with a strike price near the 1.1700 resistance level could be wise. This allows participation in potential price increases if the inflation data is strong, while minimizing risk. We remember the ECB’s decisive policy changes during the inflationary period of 2022-2023, and market participants remain vigilant. Some ECB officials have begun highlighting risks of rising inflation again, making their twelve speaking engagements this week important. Hawkish comments could further energize the Euro. In the upcoming weeks, we should monitor the range between support at 1.1580 and resistance at 1.1680. A clear break above 1.1650 could pave the way to levels of 1.1700 and 1.1750. If the Euro fails to hold above 1.1580, it may indicate that this strength is short-lived. Create your live VT Markets account and start trading now.

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