The Euro stayed mostly flat at around 1.1650 due to weak confidence data, while the US Dollar remained under pressure. Traders expect a 25 basis point rate cut by the Federal Reserve on Wednesday. The Eurozone’s Sentix confidence index rose slightly in December but is still negative. Meanwhile, positive data on German industrial production and comments from the European Central Bank have provided some support for the Euro. The Federal Open Market Committee is likely to face some disagreement, complicating future plans. In the US, important employment reports are expected before the Fed’s decision, but Monday’s schedule was light. Futures markets are predicting an 88% chance of a quarter-point rate cut, although a cut in January seems less likely. The Euro has improved since hitting lows in mid-November.

Technical Analysis For EUR USD

Technical analysis indicates that EUR/USD is supported by an upward trendline and facing resistance at 1.1680. The 4-hour RSI is above 50, although the MACD suggests slight negative momentum. Immediate support is at 1.1640, with additional resistance and support levels also noted. The Euro performed better against the British Pound, and data from China showed export growth after a previous decline. The EUR/USD is stable near the 1.1650 mark as the market focuses on the Federal Reserve’s interest rate decision this Wednesday. The US Dollar’s weakness is the main factor, as many expect a policy change. This anticipation has kept the currency pair within a familiar range. The market has mostly priced in a 25 basis point cut, with Fed fund futures showing a 92% likelihood of this move. However, last week’s unexpected strong Nonfarm Payrolls report, which added 190,000 jobs in November 2025, complicates the situation. With US inflation remaining at 3.4%, the Fed feels the need to reduce rates carefully.

Euro US Dollar Strategy Ideas

On the other end, the Euro finds support from positive economic news. Recent strong German industrial production data and hawkish comments from ECB officials indicate they are not looking to lower policy rates. This difference between the Fed’s expected easing and the ECB’s steady approach creates solid support for the Euro. With significant event risks ahead, traders might consider strategies that benefit from increased volatility. One-month implied volatility on EUR/USD options has risen to 8.5%, signaling market nerves. Buying a straddle, which involves purchasing both a call and a put option at the same strike price, could be a smart way to profit from a big price move in either direction. A highly discussed scenario is a “hawkish cut,” where the Fed lowers rates but Chairman Powell emphasizes that the fight against inflation continues. This could lead to sharp price swings—initially weakening the dollar on the cut and then strengthening it with the comments. Using short-dated weekly options could help traders take advantage of this potential market movement. Conversely, if we think the central bank’s announcement won’t break the pair out of its current range, selling premium might be wise. A strategy like an iron condor, with strikes set well outside the key 1.1590 support and 1.1730 resistance levels, could be profitable if the EUR/USD settles back into its range after the initial excitement. Create your live VT Markets account and start trading now.

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