EUR/USD rose 0.27% to near 1.1800 in European trading on Wednesday as the US Dollar weakened after President Donald Trump’s State of the Union address. The US Dollar Index (DXY) slipped 0.2% to around 97.65. In his speech, Trump highlighted his economic record and criticised a Supreme Court ruling against his tariff policy, calling it “unfortunate”. He said tariffs had helped drive an “economic turnaround”.

Shift In Market Drivers

Markets are also focused on the Federal Reserve. The Fed is not expected to cut interest rates at its March and April meetings. In Europe, attention is turning to Germany’s flash Harmonised Index of Consumer Prices (HICP) for February, due on Friday. Germany’s HICP is forecast to rise 0.5% month-on-month, after a 0.1% fall in January. The annual rate is seen at 2.1%. Destatis publishes the HICP each month, and it is harmonised across the EU to allow comparisons. From a technical view, EUR/USD traded near 1.1805. The 14-day RSI sat in the 40.00–60.00 range, and price was near the 20-day EMA at 1.1800. A daily close above 1.1835 could open a move toward 1.1900. A drop below 1.1742 could point to 1.1670. The date today is 2026-02-25T11:11:04.818Z. A year ago, EUR/USD was trying to break out of a descending triangle near 1.1800, driven by political headlines. Today, the pair is much lower, around 1.0850. The focus has shifted to differences in central bank policy. Because the main drivers have changed, last year’s trading approach no longer fits the market.

Options And Technical Outlook

In February 2025, the view was that the Fed was unlikely to cut rates, which supported the dollar. Now in 2026, the latest US CPI shows inflation is still sticky at 3.1%. The Fed has stayed hawkish, and the dollar has strengthened sharply over the past 12 months. Markets are now more firmly priced for “higher for longer” than they were last year. At the same time, the euro has weakened from the optimism linked to Germany’s inflation outlook in 2025. Recent Eurostat data shows Eurozone headline inflation has eased to 2.5%, while growth has stalled near zero. This increases pressure on the European Central Bank to cut rates sooner than the Fed, which is a major headwind for the euro. For traders, this points to more downside risk in EUR/USD. One way to express this view is to buy put options with a strike around 1.0700 and an expiry over the next 60 days. This keeps risk defined while giving exposure to a potential break below recent lows. Implied volatility has been relatively low, which may create opportunity. Sharp moves are possible around the March and April central bank meetings. If you expect a large swing but are unsure of direction, a long straddle could benefit from a big move either way, especially if policy surprises the market. The technical picture also supports the bearish shift. The 1.1835 resistance level from last year is no longer relevant. The key resistance level now is the psychological 1.1000 area. Critical support sits near the yearly low around 1.0720. Any rallies toward 1.0950 may be better viewed as chances to start or add to short positions. Create your live VT Markets account and start trading now.

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