**EUR/USD Outlook** EUR/USD has bounced back as the U.S. Dollar slows its recovery. Anticipation builds ahead of the European Central Bank’s (ECB) interest rate decision. Most analysts expect rates to stay the same, shifting focus to Lagarde’s policy hints for the future. Right now, EUR/USD is trading around 1.1750, up from a recent low of about 1.1703. The technical outlook looks good, as EUR/USD remains above its moving averages after an inverse head-and-shoulders breakout. Traders will pay close attention to Lagarde’s speech for insights on 2026 policies after Thursday’s ECB decision at 13:15 GMT. While rates are expected to remain unchanged, her guidance could sway the Euro’s movement. Immediate resistance is at 1.1804, with the September peak at 1.1918 possible if momentum continues. Support is around 1.1700, backed by the 100-day Simple Moving Average near 1.1650. Momentum indicators are looking positive, with the RSI just under 70 and MACD above zero, indicating sustained bullish momentum. The ECB’s policy statement aims to target inflation, affecting Euro volatility and short-term trends, with the next update due in December 2025. **Trading Implications** The market appears ready for a move in EUR/USD, with a positive outlook following the recent breakout. The pair is holding above important support levels, reflecting its strength. Today’s ECB decision will be a key factor for the next significant trend. Watch for increased volatility during President Lagarde’s press conference. One-week implied volatility for EUR/USD options has jumped to over 9%, up sharply from below 7% just two weeks ago. This signals that traders expect a significant price move, making strategies like long straddles appealing to capture the potential price swings. For those leaning into the bullish momentum, call options are a suitable way to target gains with controlled risk. We’re interested in strikes above the current 1.1750 level, especially aiming for a breakout above the 1.1804 resistance. A rise toward this year’s high near 1.1918 is possible if Lagarde takes a hawkish stance regarding the 2026 outlook. However, we must also consider the risk of a dovish surprise. Recent data shows the Eurozone Harmonised Index of Consumer Prices (HICP) inflation dropped to 2.1%, getting closer to the ECB’s target. This could lead to a more cautious approach, so using protective puts with strike prices around the 1.1700 support could be a smart hedge. A drop below this level may push us toward the 100-day moving average at 1.1650. A balanced approach would involve using credit or debit spreads to manage costs and define risks. Given the bullish setup, a bull call spread—like buying a 1.1750 call and selling a 1.1850 call—could provide a favorable risk-reward ratio. This strategy profits from a moderate rise in EUR/USD while significantly reducing the initial cost compared to simply buying a long call. Create your live VT Markets account and start trading now.

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