**EUR/USD Turning Point** The EUR/USD currency pair has changed direction, finding support at 1.1720 and trading above 1.1750 as the U.S. session begins. The U.S. Dollar’s recovery is slowing down, and upcoming U.S. Jobless Claims are expected to impact trading during this end-of-year period. The Euro is on track for a 14% annual gain, thanks to different monetary policies from the European Central Bank (ECB) and the Federal Reserve (Fed). Trade policies and a weakening U.S. economy have pushed the Dollar down. Recent FOMC minutes showed mixed views among Fed officials, with a narrow approval for a 25 basis points rate cut. Future rate cuts will depend on inflation trends, leading to uncertainty. The Dollar gained strength after these minutes were released. Jobless Claims in the U.S. will draw attention this week, although trading volumes might be lower due to market closures for New Year celebrations. Japanese markets will also remain closed for the rest of the week. The Euro’s strength is evident against major currencies, especially the New Zealand Dollar. The Dollar Index has decreased nearly 10% this year, marking its worst performance in eight years. The rate cut by the Fed received a 9 to 3 vote, reflecting difficulties in setting monetary policy. Future rate cuts will rely on inflation forecasts, with more cuts possible in 2026 and 2027. This week’s U.S. Jobless Claims report may show an increase in unemployment applications. **Technical Insights** Technical indicators suggest that EUR/USD might face resistance near the trendline at 1.1770. Higher levels could include December highs, while support is near the lows from December 17 and 19. The Euro is the official currency of 20 EU countries and follows the U.S. Dollar in trading volume. In 2022, it made up 31% of forex transactions, with an average daily turnover of $2.2 trillion. The Frankfurt-based ECB influences the Euro through interest rate changes and monetary policy. Inflation and economic data from the Eurozone are crucial for determining the Euro’s value. Trade balance figures also affect the Euro’s performance. Financial news editor and copywriter Guillermo Alcala notes that this information is not investment advice and should be used with caution. As 2025 ends, EUR/USD is around 1.0850. Trading should be quiet as January approaches, which can sometimes trigger sudden movements in low-volume conditions. This situation is reminiscent of past year-end periods. This mirrors market conditions from the end of 2020 when the pair traded above 1.1700 due to a policy divergence between a dovish Fed and the ECB. The situation has reversed, resulting in a stronger dollar. Now, we need to monitor if this policy gap is closing again. **Market Outlook** Recent data indicates that U.S. core inflation has cooled to 2.5% year-over-year, while Eurozone inflation is slightly lower at 2.2%, tightening the gap that has favored the dollar. With the Federal Reserve hinting at a possible pause in policy for 2026, the volatility expectations for the first quarter may be underestimated. Options traders could consider taking positions that could benefit from a breakout from the current narrow trading range. We will closely watch the upcoming U.S. Initial Jobless Claims figures, which have remained strong. The latest reading for the week ending December 27, 2025, was at 210,000. A surprising spike in claims could boost expectations for a Fed rate cut, potentially pushing EUR/USD higher. Any movement toward the 1.0900 level will be a key resistance point to observe. While past analysis pointed to resistance near 1.1770, the new key level to monitor in early 2026 is around the 1.0950-1.1000 psychological barrier. For those with long-dollar positions, buying euro call options with a strike price around 1.1000 may provide a cost-effective hedge against a potential sharp decline in the dollar during the first quarter. This strategy protects existing positions while allowing for participation in a euro rally. **Create your live VT Markets account and start trading now.**

here to set up a live account on VT Markets now