Euro Focus

This week, we’re focusing on the Eurozone’s Q4 GDP and Germany’s HICP data for January. Currently, the EUR/USD is trading at about 1.1866, staying above the 20-day EMA at 1.1713, which indicates a positive trend. Technical indicators show strong momentum, with the 14-day RSI close to overbought territory at 69.49. If the upward trend continues, EUR/USD could surpass its four-year high of 1.1919, with support seen at the 20-day EMA. The Federal Reserve can affect the US Dollar by changing interest rates to maintain price stability and full employment. Quantitative Easing (QE) generally weakens the Dollar, while Quantitative Tightening (QT) strengthens it. Always conduct individual research before making market decisions. Remember, all investments carry risks, including potential losses.

Opportunities in Euro

The strong upward momentum in EUR/USD presents opportunities. With the pair nearing a four-year high around 1.1920 and the Dollar Index (DXY) dipping to 97.00, bullish strategies for the Euro look promising. Traders might consider buying call options on EUR/USD or using bull call spreads to take advantage of further gains while managing expenses. The Federal Reserve’s meeting this Wednesday is the week’s key event, though a rate hold at 3.50%-3.75% seems already expected. The Fed’s tone will be important, especially after the 75 basis points cuts in late 2025 when unemployment rose to 4.5%. Any sign of a continued dovish approach could weaken the US Dollar further. If you expect volatility from the Fed’s statement, a long straddle or strangle on EUR/USD could be effective. This strategy profits from significant price movements in either direction, removing the need to predict how the market will react to the Fed’s guidance. It’s a direct bet on increased market activity. The Dollar’s weakness extends beyond the Euro, creating chances in other currency pairs. Recent CFTC data shows that speculative net-long positions on currencies like the British Pound and Australian Dollar against the USD are increasing, reflecting a broader market sentiment we can leverage through various cross-currency derivatives. In Europe, upcoming Q4 GDP figures will be crucial for the Euro’s strength. After a -0.1% contraction in Q3 2025, any signs of economic recovery could push the EUR/USD pair even higher. Positive inflation data from Germany could further strengthen the Euro. From a technical perspective, the Relative Strength Index (RSI) is around 69.50, which suggests the market is nearing overbought conditions. Even though momentum is strong, it’s wise to avoid chasing this rally without a strategy. Consider using options to limit risk or take partial profits on current long positions before reaching the 1.1920 resistance level. Create your live VT Markets account and start trading now.

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