During the North American session, the EUR/USD fell by 0.17%, reaching around 1.1666. This decline followed remarks from US President Donald Trump, who said that high tariffs on China were not sustainable. His comments helped ease tensions between the two countries. The US Dollar regained some strength, with the US Dollar Index rising by 0.09% to 98.42. Without new economic data, traders shifted their attention to comments from Federal Reserve officials. Most officials showed a dovish attitude but acknowledged ongoing concerns about inflation.

European Market Overview

In Europe, the Harmonized Index of Consumer Prices met expectations, showing stable price trends. Traders are looking ahead to the release of US Consumer Price Index figures expected next week. The EUR/USD pair is under pressure and facing technical resistance, with the first resistance point at the 100-day Simple Moving Average of 1.1648. Important support levels include 1.1600, 1.1550, and 1.1500. Meanwhile, resistance is near the 50-day SMA at 1.1691 and 1.1728. In the Forex market, the Euro is weaker against the Australian Dollar. Economic indicators and monetary policies are critical in determining currency value, significantly influenced by key data like inflation and trade balance figures. The recent change in trade discussions has temporarily strengthened the US Dollar, pushing the EUR/USD down to 1.1666. Although Fed officials hinted at rate cuts, they expressed concern about high inflation, sending mixed signals to the market. We must pay attention to upcoming hard data for better insights.

US Inflation and Federal Reserve Actions

Last week, the US Consumer Price Index (CPI) confirmed the Fed’s concerns about inflation, coming in higher than expected at a core reading of 3.9% year-over-year. This continued price pressure complicates the Fed’s decisions, even with a cooling labor market. This has been a trend throughout 2025, with inflation consistently outpacing expectations even as the economy slows. At the late October meeting, the Fed did implement a 25-basis-point cut that markets had anticipated. However, the message was clear: this is not the beginning of a prolonged easing cycle, and the Fed will act aggressively if inflation does not decrease. This “hawkish cut” has pushed the US Dollar Index (DXY) from 98.42 to around 99.50. As a result, the EUR/USD has fallen below the 100-day moving average at 1.1648 and is now stabilizing around 1.1580. The European Central Bank has stayed on the sidelines, showing no urgency to change its policy while inflation remains steady at 2.2%. The differing policies of a hawkish Fed and a neutral ECB are now the main influence on this currency pair. For those trading derivatives, this situation suggests that bearish strategies for EUR/USD may be beneficial in the upcoming weeks. Buying put options with strike prices near 1.1550 or 1.1500 allows for potential gains while limiting risk. The implied volatility for these options has risen since the Fed meeting, presenting an opportunity to prepare for a decline. Alternatively, bear put spreads might be a more cautious strategy, reducing the initial costs. For instance, one could buy a 1.1550 put and sell a 1.1450 put to help finance the trade and create a clear profit target. This approach is wise, given that any sudden positive news in US-China trade talks could lead to a sharp, though likely brief, reversal against the dollar. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now