Retail sales in Germany rose by 1.8% year-over-year in August, following a revised 2.9% increase in July, according to Destatis. However, on a monthly basis, sales dipped by 0.2%, compared to a 0.5% drop in July and a projected 0.6% decline. Despite these mixed results, the Euro gained some strength against the US Dollar. It performed best against the Canadian Dollar on that day.

Euro Stays Strong

The EUR/USD pair is holding steady near 1.1720 after two days of gains. If it breaks above the nine-day Exponential Moving Average at 1.1735, it could boost short-term price momentum. The German economy, being the largest in the Eurozone, has a significant impact on the Euro. During the Eurozone debt crisis, Germany was crucial in creating stability funds and enforcing strict financial regulations. Bunds, or German government bonds, are viewed as low-risk investments and serve as benchmarks for European bonds. The Bundesbank, Germany’s central bank, focuses on price stability and plays a major role in monetary policy in the region. The retail sales figures from Germany for August are sending mixed signals for the Euro. While the year-over-year growth is encouraging, the monthly decrease suggests that consumer spending may be slowing down. This mixed information indicates we should look for stronger market influences in the upcoming weeks.

Watch for Market Influences

The main focus should be on the weakness of the US dollar, which is affected by the risk of a government shutdown. Reflecting on the lengthy shutdown that started in late 2018, we saw initial dollar weakness during peak political uncertainty. This scenario makes purchasing call options on EUR/USD an appealing choice to capitalize on potential gains if the dollar continues to weaken. The uncertainty from the US situation, along with upcoming German inflation data, is creating market jitters. Over the past week, one-month implied volatility for EUR/USD options rose from 5.8% to 6.5%, indicating that the market expects greater price fluctuations. This suggests that volatility strategies, like a long straddle, could be profitable no matter which direction the market takes. Even with the dip in retail sales, other indicators from Germany are more positive, which may benefit the Euro. For example, the ZEW Economic Sentiment survey for September 2025 recently reached its highest level this year at 47.5, well above expectations. This underlying optimism may reduce significant downward pressure on the Euro, making put options a useful hedge instead of a primary bet. We should focus on key technical levels when structuring these trades. Resistance is noted around the 1.1735 mark, and a break above could lead to a quicker move, making it a good reference point for setting strike prices on call options. On the downside, the 1.1686 level serves as a floor, which could be a target for selling cash-secured puts. Create your live VT Markets account and start trading now.

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