EUR/USD traded in a narrow range near 1.1900 during Wednesday’s Asian session. Trading was cautious ahead of the US Nonfarm Payrolls (NFP) report. Direction may also depend on US inflation data due on Friday. Markets repriced after weak US Retail Sales figures. This strengthened expectations for multiple Federal Reserve rate cuts this year. The European Central Bank has stayed on hold since it ended a year-long run of rate cuts in June last year, as firmer growth has reduced the need for more easing. Comments about Fed independence also weighed on the US Dollar. US President Donald Trump said he might sue Fed chair nominee Kevin Warsh if rates were not lowered. Fed Governor Stephan Miran added that complete central bank independence is impossible. The Euro is used by 20 EU countries in the Eurozone. It made up 31% of global FX transactions in 2022, with average daily turnover above $2.2 trillion. EUR/USD accounts for about 30% of all FX transactions, followed by EUR/JPY (4%), EUR/GBP (3%), and EUR/AUD (2%). The ECB holds eight policy meetings each year. It targets price stability with a 2% inflation goal, measured by HICP. Germany, France, Italy, and Spain make up about 75% of the Eurozone economy. Trade balance data can also move the Euro. Last year, the fundamentals clearly favored a higher EUR/USD. Markets expected several US Federal Reserve rate cuts, while the ECB was seen staying on hold. This policy gap supported the Euro, so many traders viewed pullbacks as buying opportunities. Now, as of February 11, 2026, the story has flipped. The pair is trading near 1.0750. The US economy has been more resilient than expected, and January’s NFP report showed a strong gain of 255,000 jobs. This strength has pushed the Fed toward a “higher for longer” stance on rates. Meanwhile, the Eurozone outlook has weakened from what we saw in 2025. Recent data showed the economy shrank by 0.1% in the final quarter of 2025. This has increased expectations that the ECB could be the first major central bank to cut rates this year. The resulting policy divergence now favors the US Dollar. Inflation data supports that view. The latest US CPI for January came in hotter than expected at 3.4%. This is well above the Eurozone’s latest inflation reading of 2.7%. That gives the ECB more room to ease sooner than the Fed. For traders, this suggests downside remains the easier path. Because of this shift, the “buy the dip” approach from last year may no longer fit. A better approach in the coming weeks could be to sell rallies. Traders could consider using call options with strikes around 1.0850 or 1.0900 to hedge or to express a bearish view, treating those levels as potential resistance. This can capture downside while limiting risk. With central bank meetings approaching, implied volatility may rise. Traders who expect EUR/USD to stay in a lower range could look at selling option strangles. This would be a change from last year’s more directional positioning, when political pressure around Fed independence was a key driver but is now a less immediate factor.

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