EUR/USD Drops as US Economic Data Strengthens Market participants are looking for more data to guide their decisions. Key Eurozone figures on consumer confidence and economic sentiment are expected soon. In the US, news about job cuts and initial jobless claims will help indicate future trends. The EUR/USD exchange rate shows signs of weakness, closing below 1.1700. The Relative Strength Index has fallen below neutral, and the price must break through the 20-day Simple Moving Average for a potential recovery. The US Dollar is gaining strength against the Euro due to strong reports from late 2025, highlighting a surprising performance by the American economy. The EUR/USD pair has now dropped for three consecutive days, falling below the crucial 1.1700 level. This downward trend may continue as long as US economic data remains better than that from Europe. **US Dollar Strength and Euro Weakness** The strength of the Dollar is evident, with the US ISM Services index for December 2025 hitting 54.4, surpassing expectations and indicating a healthy business environment. This is backed by the latest Nonfarm Payrolls report, which revealed the economy added 150,000 jobs, suggesting that the Federal Reserve won’t need to lower interest rates. As of the end of 2025, the labor market seems to be strong. On the other hand, the Euro faces challenges. Inflation in the Eurozone has stabilized around the European Central Bank’s 2% target, easing the need for tighter policies. Additionally, a recent report showed a 0.7% decline in German industrial production last November, indicating a weaker economic outlook compared to the US. This growing disparity in economic progress and central bank approaches is deeply affecting the Euro’s value. For traders, this presents an opportunity to consider strategies that benefit from a continued drop in the EUR/USD exchange rate. Buying put options with strike prices near upcoming support levels, such as 1.1650 or even 1.1600, could be a wise choice in the coming weeks. This strategy allows us to take part in the decline while clearly defining our maximum risk. However, we must stay alert for any signs of a trend reversal, especially with the upcoming US Initial Jobless Claims data. If there is an unexpected increase in US unemployment claims, it could quickly halt the Dollar’s rise. If the EUR/USD pair manages to rise and stay above the 1.1735 resistance level, we would need to rethink our bearish outlook. This situation is reminiscent of 2022, when the Federal Reserve raised rates much faster than the ECB. That difference in policy led to a significant drop in the EUR/USD, falling below the 1.0000 mark. While we may not see such a drastic change this time, historical trends suggest that differences in central bank policies can lead to sustained directional movements. Create your live VT Markets account and start trading now.

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