The EUR/USD exchange rate stayed steady at around 1.1741 after the Federal Reserve cut rates by 25 basis points. Fed officials indicated they would pause further cuts as they assess delayed US economic data. Cleveland Fed’s Beth Hammack raised concerns about inflation, emphasizing the Fed’s goal of 2% inflation. Chicago Fed’s Austan Goolsbee suggested waiting for more information before making decisions, hinting at a possible delay in rate cuts until 2026. Kansas City Fed’s Jeffrey Schmid mentioned that there hasn’t been much economic change since October, leading to his disagreement with the rate cut.

Impact Of Inflation And Economic Indicators

Anna Paulson from the Philadelphia Fed noted that tariffs have a limited impact on prices and highlighted job risks more than inflation. In Europe, Germany’s Harmonized Index of Consumer Prices dropped by 0.5% month-on-month in November, as expected. In contrast, Spain’s index rose to 3.2% year-on-year. Technical analysis shows that the EUR/USD has a neutral to positive outlook. It could rise if it breaks above 1.1762. Resistance levels are at 1.1800 and 1.1850, with a yearly peak at 1.1918. Support is below 1.1700, with the 100-day Simple Moving Average at 1.1641. Given the Fed’s recent rate cut along with their cautious stance, the EUR/USD faces uncertainty. The mixed views among Fed officials, with some still worried about inflation, suggest that the central bank has no clear direction. This implies that the market will be sensitive to any incoming data, which has been delayed. This cautious approach is backed by the recent economic figures we reviewed before the delays. The latest US jobs report showed a solid gain of 199,000 jobs, keeping the unemployment rate steady at 3.7%. Meanwhile, November’s Consumer Price Index (CPI) showed inflation easing to 3.1%, which justified the Fed’s decision to pause and evaluate.

European Economic Outlook And Trading Strategy

In Europe, the economic outlook is also mixed, supporting a range for the currency pair. While Spain’s inflation rose slightly, the overall Eurozone inflation in November cooled to 2.4%. This leaves the European Central Bank with little incentive to act, reducing the chances for a strong euro trend. For derivative traders, this environment suggests a cautiously bullish, range-bound strategy for the near future. One possible strategy is to implement call spreads, like buying a 1.1750 call and selling a 1.1850 call, to profit from a potential move higher toward this year’s peak. This approach limits risks if the pair does not break the crucial resistance level at 1.1762 and reverses. However, the dependence on delayed data could lead to sharp market moves once it’s released. Recent market volatility has been low, around multi-year lows near the 13 level on the VIX, making options more affordable. Buying a straddle or strangle with a one-month expiration could be a wise way to prepare for a significant price fluctuation in either direction. Alternatively, if you think the pair will stay within its main support and resistance levels, selling volatility could be appealing. An iron condor with short strikes outside the 1.1600 and 1.1850 levels would benefit from low volatility and time decay. This strategy assumes that the central banks will remain inactive through the end of the year. Create your live VT Markets account and start trading now.

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