The EUR/USD pair has continued to decline, reaching around 1.1750 on Tuesday, marking a 0.2% drop. The holiday season has brought about low trading volumes and reduced global market activity, which limits movement in the market. With the markets closing on Thursday for New Year’s, trading will likely remain quiet for the rest of the week. Recent minutes from the Federal Reserve show a cautious approach, with most policymakers supportive of further rate cuts if U.S. inflation numbers decrease. However, there are concerns about the reliability of U.S. inflation data due to missing elements and assumptions in the Consumer Price Index (CPI). This uncertainty impacts both Federal Open Market Committee (FOMC) votes and traders’ expectations.

Technical Analysis And Market Trends

Currently, the EUR/USD is trading at 1.1752, showing a bullish trend above the 50-EMA at 1.1675 and the 200-EMA at 1.1393. The 50-EMA supports this trend, with the Relative Strength Index (RSI) at 60.22 signaling a bullish outlook. Momentum is slightly decreasing, as shown by a Stochastic reading of 77.61. If the price falls below 1.1675, a more significant pullback may occur, but staying above this level supports positive momentum. As the EUR/USD slowly decreases, low trading volumes are evident during this time of year. The thin liquidity suggests it might be wise to reduce position sizes to avoid being affected by sudden price changes. The market seems to be holding steady until full trading activity resumes in January. The Federal Reserve is considering rate cuts but remains cautious, waiting for more reliable inflation data. The latest core Personal Consumption Expenditures (PCE) report for November 2025 indicated a drop to 2.8%, continuing the downward trend from the peaks seen in 2022 and 2023. However, data collection issues are causing both the Fed and traders to hesitate in making decisive moves. On the other hand, the European Central Bank plans to keep its main interest rate at 3.0% as we enter the new year. In their December 2025 meeting, officials suggested a wait-and-see strategy, placing them on a different path compared to the Fed. This differing approach, with the U.S. leaning toward rate cuts while Europe stays steady, could provide support for the Euro in the upcoming months.

Market Strategies And Future Outlook

With the slow price movements and strong support around the 1.1675 mark, selling out-of-the-money puts with short-term expirations can be a good strategy. This approach allows for premium collection during this quiet holiday period and bets that the currency pair will not drop significantly before trading activity normalizes. Looking ahead to the first quarter of 2026, the ongoing uncertainty about the quality of U.S. economic data suggests that volatility may return. This scenario makes buying longer-dated options, such as straddles, an interesting opportunity for potential price movements in either direction. The current calm in the market might provide a chance to invest in future volatility at a fair price. Create your live VT Markets account and start trading now.

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