Eurozone inflation has risen, with the headline CPI at 2.2% and the core CPI steady at 2.3% for five months. This matches market expectations, mainly due to energy prices, and supports the European Central Bank’s (ECB) cautious stance. Comments from recent ECB members show little disagreement, indicating that more dovish opinions may not be voiced. In the EUR/USD market, recent actions suggest a pause lacking strong triggers. The yen appears to be a better option for US shutdown risks, with less favorable technical prospects for the euro in the near term.

Risks For EUR/USD

The risks for EUR/USD lean towards an increase, primarily driven by concerns in the US. However, to move past the 1.180 mark, new data may be needed. With Eurozone inflation stable at 2.2%, the European Central Bank seems set to keep its cautious policies. This supports the euro even though the EUR/USD pair shows signs of weakness around 1.1780 as of October 2nd, 2025. The current rally appears to be waiting for a new trigger to try breaking the important 1.1800 resistance level. The main risks in the upcoming weeks are focused on the US, which could benefit a higher EUR/USD. We’re closely watching the US government funding deadline on October 17th, recalling the market nervousness from similar standoffs in 2023. Any sign of political gridlock in Washington could weaken the dollar, helping the euro to rise.

Strategy And Market Outlook

In the current environment, we suggest selling options to earn premiums as a short-term strategy. Implied volatility for EUR/USD has recently dropped to 6.5%, below the one-year average of 7.8%, indicating that the market isn’t anticipating a significant shift right now. An iron condor with strike prices between 1.1650 and 1.1850 could take advantage of this expected range-bound trading. Nevertheless, we should be ready for a potential upside breakout, especially with the US Non-Farm Payrolls report coming soon. A weaker-than-expected jobs number might be the catalyst needed to push above 1.1800. Thus, buying inexpensive, short-dated call options at a 1.1825 strike could provide substantial upside at a low cost. To guard against unexpected dollar strength, purchasing out-of-the-money put options may offer protection. Recent data from the German ZEW Economic Sentiment survey showed a surprising increase, suggesting stable fundamentals for the Eurozone. This reinforces the idea that any significant drop in EUR/USD would likely be caused by a favorable US event rather than euro weakness. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now