The Euro stands steady against the US Dollar ahead of Wednesday’s North American session in a calm market. Since June, the Euro has traded flat, recently dropping due to global geopolitical issues and lower CPI data from France and Germany. The yield spreads between Germany and the US have narrowed a bit, affecting the Euro’s support but still remaining just shy of multi-year highs. The latest CPI figures for the euro area show a headline growth of 2.0% year-on-year, with core inflation slightly below expectations at 2.3%, compared to the forecast of 2.4%.

Market Movements

Market activity has been minimal, with momentum staying neutral as the RSI hovers near 50. Prices are currently around a 50-day moving average of 1.1647. We expect a near-term range of 1.1650 to 1.1750, which may support the Euro in the current market. Looking back to the fourth quarter of 2025, the Euro traded within a narrow range against the dollar, typically between 1.1650 and 1.1750. The market was quiet, and indicators like the RSI were neutral, indicating that few traders were making strong bets. This low volatility made it hard to profit unless using range-trading strategies. This calm period ended sharply in November 2025, when key support at 1.1647 broke. Diverging economic data drove this shift, with Eurozone core inflation dropping to 2.1% in the final 2025 readings. At the same time, US data in late December indicated core inflation remained over 3.0%, widening the economic gap between the two regions. This inflation divergence has affected central bank expectations and contributed to the Euro’s decline. The European Central Bank has taken a more cautious approach as we head into 2026, while the Federal Reserve remains firm. Currently, the interest rate futures market suggests a near-zero chance of an ECB rate hike in the first quarter, further pressuring the Euro.

Strategies for the Euro’s Decline

With the breakdown of the long-held range, low-volatility strategies like selling options have become much riskier. Implied volatility on EUR/USD options, which was low in late 2025, has risen. We should expect that the Euro’s path of least resistance is downward, with the previous support level of 1.1650 now acting as notable resistance. In the coming weeks, we should consider strategies that profit from a continued downward trend or limit potential upside. Buying puts or using bearish put spreads on the EUR/USD could allow us to profit if the pair weakens towards the 1.1300 level. These strategies help us participate in the new trend while clearly defining our risk. The release of the December 2025 US non-farm payroll data this Friday will be a pivotal event. A strong jobs and wages report is likely to reinforce the Federal Reserve’s firm stance, potentially driving the currency pair lower. We must be ready for increased volatility around this release. Create your live VT Markets account and start trading now.

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