EUR/USD is trading at 1.1635, close to a one-month low of 1.1618, even after positive Industrial Production data from the Eurozone. Production in the Eurozone increased by 0.7% in November and 2.5% year-on-year, which was better than expected. The Euro remains under pressure due to strong US economic data and steady interest rates from the Federal Reserve. In November, US producer prices rose by 3%, and retail sales grew by 0.6%, supporting the US Dollar.

Market Concerns Eased

US President Donald Trump’s comments about Fed Chair Jerome Powell have eased worries in the market. Investors are now waiting for more US economic reports to better understand possible actions from the Fed. The Euro improved against the Canadian Dollar, while the US Dollar gained strength due to positive PPI and retail sales reports. Geopolitical tensions lowered after Trump spoke on Iran, impacting oil and safe-haven assets. Predictions show Eurozone Industrial Production may grow by 0.5% in November. Upcoming US manufacturing indices could shift market trends. Currently, EUR/USD stands around 1.1635, with technical indicators hinting at bearish momentum. Important support levels are at 1.1615 and 1.1600, while resistance is near 1.1660 and 1.1700. The Euro is struggling below the 1.1640 mark against the dollar, indicating ongoing weakness as we move through January 2026. This pressure mainly comes from the US, as recent data shows inflation is hard to control. Last week’s Consumer Price Index (CPI) for December 2025 reported inflation stubbornly holding at 3.1%, keeping the Federal Reserve cautious.

Economic Divergence and Market Strategy

Although Eurozone’s industrial production showed steady numbers in November 2025, the overall outlook is less favorable. More recent manufacturing data, like Germany’s December PMI, which fell to 48.5, indicates the European economy is struggling. This economic divergence favors a stronger dollar against the Euro. Given this situation, we may see the Euro weaken further in the coming weeks. It would be wise to consider strategies that profit from a decline in the EUR/USD pair, such as buying puts. These trades could serve as good hedges or ways to take advantage of the current bearish trend. The Federal Reserve’s position is a key factor here, and the market doesn’t expect any interest rate cuts soon. Current market trends via the CME FedWatch Tool show over 90% probability that the Fed will maintain rates at their next meeting. This outlook makes holding onto dollars more appealing than Euros. Chart analysis shows the pair remains in a downward channel observed in late December 2025. The immediate focus is on the recent low around 1.1615. A breakout below that might lead to the 1.1600 level. Any small rallies are likely to meet resistance and should be seen as selling opportunities. Create your live VT Markets account and start trading now.

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