On Wednesday, the EUR/USD pair bounced back a bit as the US Dollar dipped from its recent highs. The Euro rose against the Dollar, trading close to 1.1611 after hitting a low of 1.1576 during the day. At the same time, the US Dollar Index fell to about 98.84, down 0.13%. Technically, the EUR/USD pair is still in a downward trend that started on September 17. It is trading below the 50-day and 100-day Simple Moving Averages, which are at 1.1690 and 1.1656, indicating a bearish outlook. If the pair moves above these levels, it could rise towards 1.1750 and maybe even 1.1800.

Key Support and Resistance Levels

On the downside, support is at 1.1550. If the price drops further, it could aim for 1.1500 or even 1.1400. Momentum indicators show mixed signals, with the Relative Strength Index at 44, suggesting weak bullish momentum. The MACD shows the downside pressure is easing, but not fully reversed. For a bullish signal, the EUR/USD needs to close above 1.1700. Until that happens, sellers may continue to apply pressure, trying to hold the 1.1650-1.1700 range and potentially targeting 1.1500. Today, the US Dollar is the strongest against the British Pound. The bearish trend in EUR/USD is familiar, but the situation is different now on October 22, 2025. A few years ago, the pair was around 1.16, and the US Dollar Index was below 99. Today, the Dollar Index is firmly above 107, making it hard for the EUR/USD to stay above 1.04.

Interest Rate Differential Impact

The main reason for this is the growing interest rate gap between the Federal Reserve and the European Central Bank. The Fed is keeping its benchmark rate at about 5.00% to control inflation, while the ECB has started reducing rates, dropping to 3.50% due to a struggling Eurozone economy. This difference makes US dollars more attractive for traders looking for higher yields. Recent economic data supports this view. The latest US inflation report showed a rate of 2.7%, which is still above the Fed’s target. In comparison, Eurozone inflation has cooled to 2.2%, with weak GDP growth forecasts of just 0.5% for the last quarter, while the United States is projected at a stronger 1.8%. This ongoing weakness puts pressure on the euro. In the derivatives market, we’re leaning towards strategies that profit from a steady decline or consolidation at these lower levels. We see traders increasingly buying EUR/USD put spreads—like buying 1.03 puts while selling 1.01 puts in the upcoming weeks. This strategy provides a clear, risk-defined approach to target a move towards parity. Implied volatility is relatively low, making options strategies a cost-effective way to prepare for the next move. Although the downward trend appears to be the easiest path, some traders are selling out-of-the-money puts with strike prices under 1.02 to collect premiums, betting on a potential support level forming. However, the current macroeconomic conditions suggest that downside risks are likely to prevail through November. Create your live VT Markets account and start trading now.

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