The EUR/USD is under pressure as the US Dollar strengthens due to geopolitical tensions. If it falls below the 100-day Simple Moving Average (SMA) at 1.1665, it could lead to further losses. Recently, the pair hit a four-week low around 1.1670, continuing its downward trend from recent highs. However, soft expectations from the US Federal Reserve might limit the dollar’s gains, providing some support for the Euro. In terms of technical indicators, the Moving Average Convergence Divergence (MACD) shows negative momentum, while the Relative Strength Index (RSI) suggests limited upward potential. The 100-day SMA is an important support level. If it breaks, it would favor sellers, but if it holds, the pair could stabilize above this level, needing an RSI above 50 to regain bullish momentum. The Euro gains support from the European Central Bank’s (ECB) decision not to cut rates further.

The Euro Overview

The Euro is the second most traded currency worldwide. The ECB manages its monetary policy. Key economic data like GDP, inflation, and trade balances greatly influence the Euro’s value. The Euro typically becomes stronger with higher interest rates from the ECB. At the end of 2025, the EUR/USD faced significant pressure, testing the important 100-day moving average support near 1.1665. Market observers were eager to see if this level would hold, especially with increasing geopolitical tensions boosting the US dollar. However, this support was broken in early January. The break happened because of new data that changed the outlook from late December. The US jobs report from December 2025 showed the economy added 210,000 jobs, outperforming expectations and challenging the idea of a dovish Federal Reserve. This was further complicated by US inflation data, which remained steady at 3.4%, making a quick return to the 2% target unlikely.

Weak Eurozone Economic Data

Conversely, recent Eurozone data has been disappointing, contributing to the currency’s weakness. Germany, the largest economy in the bloc, reported a 0.5% month-over-month decline in industrial production for November 2025, indicating ongoing economic challenges. This gap between a robust US economy and a struggling Eurozone is now the main factor affecting the pair. For traders dealing with derivatives, this confirms a bearish outlook in the short term. It might be wise to consider buying put options to profit from further declines, targeting the October 2025 lows around the 1.1550 area as the next support level. Historically, after a similar break of the 100-day SMA in the second quarter of 2024, the pair quickly dropped by 200 pips in the following weeks. Implied volatility has begun to rise, reflecting renewed uncertainty regarding central bank policies. This makes outright long options more expensive, so traders may want to consider vertical put spreads to manage risk and lower initial costs. We expect volatility to remain high before the upcoming ECB and Fed meetings later this month. Create your live VT Markets account and start trading now.

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