The EUR/USD pair ended the week up nearly 1%. This increase came even with U.S. economic data falling short of expectations, balanced by positive trade updates.

Economic Data Highlights

Optimistic trade news between the U.S. and the EU helped improve market sentiment. U.S. durable goods orders dropped 9.6% in June after a 16.5% rise in May, heavily influenced by transportation. Core orders saw a small increase of 0.2%, showing some signs of steady business investment. President Trump mentioned progress in trade deals with Japan and possible agreements with the EU and China. However, EU countries plan to vote on counter-tariffs against U.S. goods if a trade deal isn’t reached. The European Central Bank (ECB) kept interest rates steady at 2% due to uncertainties within the region. Looking ahead, next week will feature the FOMC meeting, U.S. GDP data, EU inflation rates, and employment figures. Technical analysis shows EUR/USD is stabilizing around 1.1750. If it rises above 1.1800, it could approach the yearly high of 1.1829. However, if it falls, 1.1556 is a possible support level. The Euro’s value depends on economic data and trade balances. We believe the recent rise in the currency pair is unstable since it relies more on trade optimism than solid economic data. The mixed signals from weak U.S. statistics and hopeful trade news point to a market without a clear path. This uncertainty can often lead to increased volatility.

Federal Open Market Committee Meeting

The upcoming Federal Open Market Committee meeting will be crucial for the dollar’s direction. With U.S. inflation recently at 3.1% in June, we expect a more aggressive stance compared to the European Central Bank, which faces a lower Eurozone inflation rate of 2.4%. This difference in policy typically strengthens the dollar against the euro. Next week’s U.S. GDP figures are also important, with predictions around 2.1% growth for the second quarter. A better-than-expected result could boost confidence in the U.S. economy and strengthen the dollar. We are preparing for increased volatility around these key releases. While former President Trump’s comments on trade deals can cause short-term boosts, underlying tensions continue to pose risks. The ongoing threat of EU counter-tariffs if a deal falls through makes for an unpredictable environment. In the past, such trade disputes have led to sudden and sharp moves in the currency market. We see the current stability around 1.1750 as a chance to set up for a breakout using options. Buying straddles or strangles can let traders profit from big moves in either direction, which seems likely given the upcoming risks. Low implied volatility before major data releases often makes this strategy appealing. A strong move above 1.1800 would prompt us to consider call options aimed at the yearly high. On the flip side, if the support holds and moves toward 1.1556, put options could be worthwhile. We recommend avoiding large, unhedged positions until after next week’s central bank meeting. Create your live VT Markets account and start trading now.

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