**The Euro’s Support from the ECB**
Economists expect the ECB to keep interest rates steady this year, with no changes anticipated for next year. This outlook supports the Euro’s rise. However, for significant gains, it must break above the 200-day SMA at 1.1625. We should note that trading volumes may be lower due to the US holiday.
This week’s currency heat map shows the USD performing poorly against major currencies, especially against the Japanese Yen.
**Market Sentiment and Technical Analysis**
Reflecting on market sentiment from late 2021, a bullish case for EUR/USD was forming due to differing central bank policies. The main point was the importance of breaking above the 200-day moving average, which ultimately did not hold. This experience highlights the need for technical confirmation before following a trend.
A similar situation is unfolding now, with new data backing this outlook. The recent US Consumer Price Index for October 2025 came in at 3.1%, slightly below expectations, suggesting the Federal Reserve may start a slow rate-cutting cycle in early 2026. In contrast, the Eurozone’s Harmonised Index of Consumer Prices is steadier at 2.9%, leading ECB officials to remain neutral.
This difference in policy makes going long on EUR/USD appealing for the upcoming weeks. We recommend that derivative traders consider buying call options on the EUR/USD, possibly with a strike price around 1.0950, expiring in February 2026. This strategy offers potential gains while managing risk, a lesson learned from the failed rally in late 2021.
The key technical level to watch now is the 100-day moving average, currently around 1.0910. If we see a strong move above this level, it would indicate stronger momentum than in the past. Implied volatility for EUR/USD options has increased to 7.5% for three-month contracts, up from 6.8% last month, signaling that the market expects bigger price movements.
Given the US Dollar’s broad weakness against commodity currencies, traders might also consider selling out-of-the-money USD call options against the Australian or New Zealand Dollar. This strategy allows for premium collection while betting on ongoing USD weakness. However, caution is advised, as year-end flows can sometimes cause unexpected dollar strength.
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