The EUR/USD currency pair is close to a seven-week low but remains above the key support level of 1.1400. The US Dollar’s strength has kept the Euro under pressure for six days in a row, with the US Dollar Index reaching a new two-month high near the 100 mark. In July, Germany’s Consumer Price Index (CPI) rose by 0.3% month-over-month, while the annual rate held steady at 2.0%, aligning with market expectations. Additionally, US data revealed that the core PCE Price Index grew by 0.3% month-over-month in June, with a yearly increase of 2.8%, slightly exceeding the forecast of 2.7%.

US Economic Indicators

In the US, personal spending rose by 0.3% in June, outperforming May’s data, while personal income also increased by 0.3%. Initial jobless claims dropped to 218K for the week, falling below expectations, highlighting a tight job market. Germany’s mixed inflation signals did not help the Euro. The monthly CPI was 0.3%, just above the 0.2% forecast. Meanwhile, the Eurozone Unemployment Rate decreased to 6.2% in June, indicating a strong labor market in the region. The Euro showed strength against the Japanese Yen, as shown in the day’s currency heat map. The ongoing strength of the US Dollar keeps the EUR/USD pair under pressure. The main point is the contrast between a strong US economy and a weaker outlook for the Eurozone, which is likely to influence trading in the upcoming weeks. The critical support level at 1.1400 is the area to focus on. Recent US data from July 2025 supports this perspective, showing persistent core inflation and a tight labor market. The Federal Reserve has maintained a “higher for longer” stance on interest rates throughout 2025, giving them little reason to adjust their approach. This stands in contrast to the European Central Bank, which has indicated a more cautious stance due to some economic weaknesses in the Eurozone.

Derivative Trading Approaches

For those trading derivatives, a bearish outlook on the EUR/USD seems reasonable. One strategy could be buying put options with a strike price below 1.1400, which allows positioning for a potential drop. This method defines risk if the support level holds and the pair rises instead. It’s also important to remember that major support levels can lead to short-term rebounds before breaking. An alternative approach is to sell out-of-the-money call credit spreads, allowing for premium collection while betting that the pair won’t rise significantly from current levels. This strategy is more conservative, benefiting from either a continued decline or sideways movement. Looking back, in early 2024, the EUR/USD faced a similar prolonged test near the 1.0950 mark before finally breaking down after several weeks. As we approach the 1.1400 level, we might see an increase in implied volatility, which raises the cost of options but also enhances potential rewards. This scenario supports strategies that can take advantage of significant moves in the coming weeks. Create your live VT Markets account and start trading now.

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