The EUR/USD is currently trading slightly lower at around 1.1620 in early European sessions. The pair still looks positive as it remains above the 100-day EMA, but the bearish RSI at 42.60 indicates that it may decline further. A strong resistance level is at 1.1657, with support starting at 1.1555. Despite challenges like US-China trade tensions bolstering the US Dollar and ongoing political unrest in France, the EUR/USD maintains its bullish outlook. If the pair manages to gain more, it could reach the resistance point at 1.1758. However, if it drops, it might hit a crucial support level at 1.1403.

The Euro’s Influence

The Euro, which is used by 19 EU countries, made up 31% of all foreign exchange transactions in 2022, with over $2.2 trillion traded every day. The value of the Euro is greatly affected by the European Central Bank’s (ECB) monetary policy and inflation data. Generally, higher interest rates strengthen the Euro. Economic indicators like GDP, PMIs, and the Trade Balance also play a significant role. Strong economic data tends to support the Euro, while a negative Trade Balance can weaken it. Currently, the EUR/USD pair is at the important level of 1.1620, which has been significant in the past. While it remains above the crucial 100-day moving average, caution prevails in the market. The bearish signal from the Relative Strength Index suggests that there is still a risk of decline.

Current Market Dynamics

The market dynamics have shifted since past concerns about US-China trade tensions. Now, in October 2025, the ECB is a key player, maintaining its deposit rate at 3.50% to tackle stubborn inflation. Recent Eurozone data shows inflation at 2.8%. This aggressive ECB stance offers solid support for the Euro, which is a change from a few years ago. However, political issues in France remain a concern. The fragmented government following the 2024 elections brings legislative uncertainty, which could limit the Euro’s upside. This ongoing political risk is why we see limits on gains, even with a positive monetary policy. On the other side, the focus has now shifted from trade wars to differences in monetary policy. Recent US inflation data has cooled, prompting the Federal Reserve to lean towards a more dovish approach for early 2026. This gap between the hawkish ECB and a potentially pausing Fed creates a strong bullish case for the EUR/USD that wasn’t present before. For derivative traders, this scenario opens up opportunities to use options to navigate conflicting signals. A bull call spread—buying a call option at a 1.1650 strike and selling one at 1.1750—might be a good strategy to profit from a potential rise while limiting risk. This approach allows traders to benefit from the strong support coming from the ECB. However, it’s important to monitor the key support level at the 100-day EMA, currently near 1.1555. A drop below this level could lead to a sharper decline, especially if negative news emerges from France. Therefore, holding protective put options with a strike below 1.1550 is a wise move to hedge against unexpected downturns in the coming weeks. Create your live VT Markets account and start trading now.

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