The Euro is stuck in a range as concerns in Ukraine and pending US inflation data capture attention. The EUR/USD is at 1.1640 before the US market opens, with traders closely watching the US CPI and peace discussions between the US and Russia.

Peace Talks and Inflation Data

Hope for a peace agreement in Ukraine is growing with an upcoming meeting planned between the US and Russian presidents, possibly including Ukraine’s President Zelensky. In Italy, inflation dropped by 1% in July, and the trade surplus decreased to EUR 5.40 billion. US inflation numbers set to be released on Tuesday could impact market sentiment. Expectations are for an increase in the year-on-year rate to 2.8%, up from June’s 2.7%. This may lead to a rethinking of policy. Meanwhile, US and China continue negotiating over trade tariffs and export restrictions. Technically, EUR/USD remains capped below 1.1700, consolidating after a rise from 1.1400. The pair might test support around 1.1630, with resistance near 1.1700. Current price patterns suggest limited upward movement unless a breakthrough occurs. The EUR/USD currency pair is currently trading around 1.0950, squeezed by conflicting pressures. Persistent inflation in both the US and Eurozone is met with caution from central banks, resulting in unclear direction. The latest US CPI data for July shows a rise to 3.1%, keeping the Federal Reserve alert. Looking back to early 2022, a similar uncertainty prevailed as the EUR/USD consolidated below 1.1700 during the onset of the Ukraine conflict and inflation concerns. The main themes of geopolitical risk and central bank policy that influenced that period are still relevant today. This history teaches us that strong catalysts are needed to break through the current stalemate.

Strategies for Trading Volatility

Given that prices are fluctuating between roughly 1.0800 and 1.1100, selling volatility could be a smart strategy. Traders might explore techniques like an iron condor, which benefits when the pair stays within a specific price range. This tactic takes advantage of the market’s current indecision ahead of important economic events. We should brace for potential volatility spikes as the Jackson Hole symposium approaches later this month. The Cboe EuroCurrency Volatility Index (EVZ) is at 8.5, indicating that traders expect future movement, even if the current market seems calm. Purchasing inexpensive, long-term options could offer a cost-effective way to hedge against any unexpected policy announcements. Another option is to use calendar spreads for positioning amid changing volatility. This involves selling a short-term option that likely will expire worthless while buying a longer-term option. This strategy could be profitable if volatility increases in the coming months as central banks provide more guidance. In the short term, our attention should turn to the upcoming August German ZEW Economic Sentiment and US flash PMI data. These reports will offer insights into the relative economic health of both regions. Any notable differences from expectations could create short-term trading opportunities within the broader range. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now