Potential Drop in the Euro Below Key Support

The Euro (EUR) might slip below 1.1645 soon. Although it may not fall all the way to 1.1610, the risk for the Euro remains high. If it drops below 1.1645, the next support level could be at 1.1610, according to analysts at UOB Group. In the last 24 hours, the Euro moved outside the expected range of 1.1690/1.1730, falling to 1.1647 and closing at 1.1655, a drop of 0.46%. While it is currently oversold, it might still dip below 1.1645, though a further fall to 1.1610 is less likely. To maintain its momentum, the Euro needs to stay below 1.1690, with weaker resistance at 1.1675. Looking ahead to the next 1-3 weeks, the Euro tested the 1.1645 support level sooner than anticipated, suggesting further declines could happen. If it breaks and holds below 1.1645, it may aim for the 1.1610 support. However, if it rises above 1.1720, the risk of a drop diminishes, with previous strong resistance at 1.1755. Given the current risk for the Euro, we should be ready for a possible fall below the 1.1645 support in the upcoming weeks. The downward movement is happening more quickly than we expected, indicating significant underlying weakness. This expectation is supported by recent data showing a gap between the US and Eurozone economies. The latest US jobs report from October 3, 2025, showed higher-than-expected job growth, boosting the dollar’s strength. In contrast, last week’s Eurozone manufacturing PMI data indicated a slowdown, particularly in Germany. This economic backdrop suggests a weaker Euro compared to the dollar.

Difference in Monetary Policy Between the US and Eurozone

Federal Reserve officials have kept a hawkish stance, suggesting another rate hike may occur before the end of 2025 to tackle rising inflation, which reached 3.4% in the most recent report. Meanwhile, the European Central Bank is likely to keep rates steady due to concerns about slow economic growth. This difference in policies makes dollars more appealing than euros. For traders using derivatives, buying put options with a strike price near 1.1600 could be a smart way to benefit from a drop below the next support level. This offers direct downside exposure while limiting risk to the premium paid. The position should be considered for expiration in late October or November to allow time for movement. Since the market is currently oversold, a short-term bounce is possible, making outright shorting risky. A bear put spread, such as buying a 1.1650 put and selling a 1.1550 put, could be a more cautious strategy. This approach lowers initial costs and still allows for profit if the Euro weakens, though gains would be capped. Similar periods of dollar strength have occurred before, especially during the 2022-2023 rate hike cycle when the Euro dropped below parity. While we’re not predicting such a significant movement now, history shows that once a key technical level is broken, the follow-up can happen quickly. Therefore, we should see any rallies towards the 1.1720 resistance as chances to position for further declines. Create your live VT Markets account and start trading now.

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